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Making Tax Digital for Income Tax

MTD for Income Tax and Self Assessment

We are HMRC-recognised for developing MTD Income Tax Self Assessment software.

As well as Making Tax Digital for VAT, HMRC is also planning to implement Making Tax Digital for Income Tax.

How does it work?

As with MTD for VAT, one of the main requirements of MTD for Income Tax is the necessity to keep a digital record of income and expenses. This can still be via a spreadsheet, as long as the data is imported digitally into the software used to send a summary of income and expenses to HMRC.

A summary of income and expenses must be sent to HMRC every three months. Using the information that has been sent, HMRC can then provide an estimate of the tax liability. A final report needs to be sent to HMRC which confirms the income and expenses of the accounting year. At this point, a claim for allowances and reliefs can also be made and a final tax calculation obtained.

Although there is an obligation to send income and expense information every three months, it is possible to send an update to HMRC more often, for example, if a more up-to-date tax estimate is required.

What's TaxCalc doing to help Agents?

We're actively working on solutions, as recognised by HMRC, to make the transition into MTD for Income Tax as seamless as possible. Initially we will be providing a method to submit your periodic updates to HMRC and enhancing the range from there. We are also keen to develop transactional record keeping, in time, as a solution for the digital record keeping requirements to assist in the submission of quarterly updates to HMRC.

MTD for ITSA Pilot

To ensure our customers are able to familiarise themselves with the MTD for ITSA process, and experience the full capability of our software with live clients, we shall be accepting invitations to join the pilot programme for the 2023/24 tax year, ahead of the mandation of the 2024/25 tax year from April 2024.

HMRC will be sharing more detail in 2022 including the pilot outline plan, which will include a roadmap identifying when various customer types will be eligible to join.

The current criteria for joining the pilot scheme is as follows:

  • Sole traders with income from one business and landlords who rent out UK property.
  • Self-Assessment tax returns and payments are up to date and you're a resident in the UK for tax.
  • You cannot currently join MTD for Income Tax if you have income from any other source or if you have other payments you make that are taxable or that you claim tax relief on.

We will keep you up to date with any changes in eligibility.