Making Tax Digital (MTD) is coming. Businesses and landlords will be required to submit online a regular summary of income and expenses to HMRC, at least quarterly. The annual tax return will be replaced by a personal digital tax account, which will be updated with information HMRC receives from third parties, such as banks.
This information flow will only be possible if every business uses software which can communicate directly with HMRC’s systems. HMRC has said a free version of this software will be available for some small businesses.
The start date for those businesses to comply with MTD reporting has been pushed back by one year, which will give the software suppliers extra time to work on their free offering. Taxpayers with business or rental income of no more than £10,000 per year will be exempt from the MTD reporting requirements.
All other businesses and landlords will have to start sending regular ‘updates’ for the first accounting period that starts on or after:
- 6 April 2018 for unincorporated businesses with turnover exceeding £85,000, excluding large partnerships
- 6 April 2019 for unincorporated businesses with turnover exceeding £10,000 but not £85,000
- 1 April 2019 for all VAT- registered businesses, for VAT-related reports
- 1 April 2020 for all companies to report income and expenses subject to corporation tax and for partnerships with turnover of £10 million or more
There are still many unanswered questions about the practicalities of MTD, but it is happening. Let’s talk about how your accounting system can be adapted to cope.