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What Is the Next Step for “Making Tax Digital”?
06 October 2021

With the reliability and accuracy that digital offers businesses (like mobile platforms to locate isles in real-time to ticket-purchasing sites for football matches), the HMRC is doing the same with the UK tax system.

Called Making Tax Digital (MTD), this new venture improves the accuracy, efficiency, and security of all tax filings, all online. Recently, HMRC expanded MTD to include the Income Tax Self Assessment (also called MTD ITSA), and with it came additional requirements for landlords earning over £10,000 annually.

Since this expansion now affects a wider audience, we find it necessary to explain this proposed plan and provide insight into what to do next.
HMRC has implemented a pilot version of Making Tax Digital since 2019 for businesses and individuals with a taxable turnover above £85,000 annually and will be required for those parties to file in April 2022.

What is “Making Tax Digital”?

The HMRC recommends that all qualified persons enrol as soon as possible. Those earning below £85,000 per annum are encouraged to enrol voluntarily but are not required.

As HMRC does not provide a service of their own for MTD, we highly recommend using Xero, a user-friendly, cloud-based platform that we use daily.
Starting April 2024, Making Tax Digital will broaden its scope to include income tax records and expand applicant eligibility.

The New MTD Income Tax Self-Assessment

Landlords and self-employed (trades) persons earning more than £10,000 per annum from these ventures must submit their tax forms every quarter electronically. The latest submission dates are 5 August, 5 November, 5 February, and 5 May.

Per HMRC law, exceptions include estates, trusts, trustees of registered pensions, and non-domestic companies, regardless of the annual income. Additionally, those already mandated to submit tax forms according to MTD and earn at least £10,000 annually through rentals or self-employment are automatically enrolled in the Income Tax programme.
If you qualify for the expanded version of MTD, there are two procedures that you can take to ensure compliance: Self-reporting and agency reporting.
You are free to report your income tax through MTD-compatible software by yourself, provided that you register and then update your account information at least once a quarter.

What Are My Options?

Self Reporting

First, you must complete the HMRC registration pilot and ensure that your Government Gateway ID and password (the same credentials used in previous Self-Assessments) are present. Additionally, you will need to provide your National Insurance number and business information (start dates, registered addresses, tax accounting year) when filling out the pilot.

Once the account is set up, simply use the software of your choice to send HMRC a digital summary of all income and expenses for each quarter. A digital record is needed for MTD ITSA, so all physical receipts collected must be recorded digitally and completed as soon as possible.
The other option to complete the MTD ITSA transition is an agency acting as a third party to do the above steps for you, including the required quarterly filings.

Agency Reporting

Here at 10.CA, we take care of the MTD registering and reporting in-house, taking the utmost care to ensure complete accuracy, compliance, and punctuality. We do this by collecting your tax files from you, sending you monthly updates regarding your account, and highlight areas of concern while providing the proper corrective measures.
With HMRC’s plan to include income tax reports into their Making Tax Digital starting in 2024, the time is now for all eligible landlords and self-employed persons to begin the conversion over to MTD, and we are here to help.

Final Remarks

To stay up to date regarding MTD or to utilize our MTD filing services, please feel free to call us at 01604 620 810 or Contact us here.