HMRC have shared further details on how Making Tax Digital for Income Tax (MTD) will work. It is hoped the new legislation will play a key part in making it easier for individuals and businesses to get their tax right and keep on top of their affairs.
Who will be affected?
Self-employed business owners and landlords with business or property rental income over £10,000 will be affected. There are exceptions to some types of partnerships (such as those that include a corporate partner), trusts and estates. We recommend you check these exemptions carefully if you think they may apply to you.
When will the changes take effect?
Changes will take effect from the beginning of the 2024/25 tax year starting on 06 April 2024 (this has been moved back a year from HMRC’s initial proposals).
If you have a business with a 31 March 2024 year end no additional time will be awarded. HMRC will class this the same as a 05 April 2024 year end and you will be required to start MTD from 06 April 2024.
What changes will I see?
HMRC Approved Software
MTD will require you to use HMRC approved software which will submit your income information directly to them. Spreadsheets can be used for this submission, but we would not recommend this as once it has been submitted it cannot be altered.
Quarterly Reports
Quarterly reports for each income source will need to be submitted to HMRC.
An income source is defined as business income and/or property rental income.
The reports will be a basic profit and loss account showing sales income for each income source and purchases/expenses for each income source.
Estimated figures can be used in the quarterly submissions (a declaration of accuracy is only required as part of the End of Period Statement submission).
The quarterly submissions will be used to estimate your tax liabilities throughout the year, but at present there are no plans to change the timing of the tax payments. Each quarterly submission will be subject to due dates as follows:-
HMRC have said that no penalties will arise until four quarterly reports have been filed late.
End of Period Statement
Following four quarterly submissions (so, after 05 April 2025), an End of Period Statement (EOPS), per income source, will need to be submitted to HMRC. If you start trading mid-way through the year and EOPS will be required following the 05 April submission.
This EOPS will allow you to make any adjustments to the figures submitted throughout the year and must be submitted to HMRC by 31 January – following the end of the tax year.
You will need to submit an EOPS for each income source.
Final Declaration
The Final Declaration will effectively replace your self-assessment tax return and will need to be submitted to HMRC by 31 January following the end of the tax year.
The Final Declaration will include any income sources not already reported and will be used to calculate your final income tax liability for the year.
What impact will quarterly reporting have on me?
The impact on you will be defined by how many sources of income you have.
The minimum impact will be an increase from one submission per year to six submissions per year. However, if you have more than one source of income this will increase.
| Number of Sources of Income | Submissions Required Per Annum |
| 1 | 4 x Quarterly Reports 1 x End of Period Statement 1 x Final Declaration |
| 2 | 8 x Quarterly Reports 1 x End of Period Statement 1 x Final Declaration |
You can join MTD now!
HMRC are running a live pilot aimed at testing the MTD service before it is launched in 2024. If you are already keeping up to date digital records, why not volunteer and get ahead of the game? More information can be found here:-
https://www.gov.uk/guidance/sign-up-your-business-for-making-tax-digital-for-income-tax
GreenStones are here to help…
We will keep you updated of any new developments announced by HMRC. However, if you have any questions or would like some support with MTD, give the team a call on 01733 371180, they will be happy to support you.