Making Tax Digital for Income Tax will change the way millions of business owners and landlords report their earnings to HMRC.
If you’re wondering how this might affect you, here’s a simple guide to the new rules.
From April 2024, you’ll need to follow HMRC’s rules for Making Tax Digital (MTD) for Income Tax, which will change the way you work with your accountant or bookkeeper.
The first stage of Making Tax Digital, MTD for VAT, was introduced in 2019. It requires owners of VAT- registered businesses with VATable sales above the VAT threshold (currently £85,000) to keep digital records and use MTD-compatible software to submit their VAT returns electronically.
These rules were extended in April 2022 to include all VAT-registered businesses.
MTD for Income Tax, also referred to as MTD for Income Tax Self Assessment (MTD for ITSA), is the second stage of Making Tax Digital and will replace the current system of annual Self Assessment tax returns. MTD for Income Tax will come into effect in April 2024 for self-employed business owners and landlords, and in April 2025 for partnerships with individual partners.
Other types of partnership will join at a future date.
MTD for Income Tax is a government initiative that will change the way that landlords manage their property finances and make tax submissions to HMRC.
From 6th April 2024, MTD for Income Tax will apply to all landlords whose total property and/or business income is above £10,000 per year.
If this is the case, you will need to use software to:
Initially, MTD for Income Tax will affect self-employed business owners and landlords with a total business and/or property income above £10,000 per year.
These individuals will have to follow MTD for Income Tax rules from 6th April 2024.
Partnerships with individuals as partners will have to follow the rules from 6th April 2025.
HMRC has advised that limited liability partnerships (LLPs) and partnerships with corporate partners will be required to join at a future date yet to be confirmed.
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