Fast, effortless and 100% online.
MTD for Self Assessment – let’s go!
Whether you’re self-employed, a landlord, or earn a bit of extra money on the side, it’s likely that you already know the ins and outs of filing a tax return each year. But what if we told you that the way you report your earnings and file your taxes was all about to change?
Read on to find out more about the new Making Tax Digital Self Assessment tax changes…👇
Making Tax Digital is the process in which the UK government and HMRC are switching the UK tax service over to a fully digital one. VAT-registered businesses, landlords, AND the self-employed will soon have to complete their tax records entirely online using a special type of MTD-compliant software.
If you currently file an annual Self Assessment tax return, the biggest change to know about is that completing this each year will become a thing of the past.
Don’t worry, we get it. This is a big change in the world of taxes, but HMRC and the government hope that MTD will make it easier for those who currently file. Not harder.
Not only will the switch to a digital system help you to avoid making common mistakes, but you’ll also be able to plan and budget better for your end-of-year tax bill.
Instead of completing a yearly tax return, under the Making Tax Digital rules, you’ll have to keep and submit digital records of your earnings and expenses using MTD-compatible software.
There are three parts that you will need to submit for MTD:
BUT once you’ve submitted your quarterly update you won’t pay the tax you owe there and then. Instead, you’ll get an estimate of the tax due up until that period. You’ll still pay your tax bill on the usual deadline (31st January of the following calendar year).
In theory, this will make it a lot easier to keep track of how much tax you owe in real-time – helping you to avoid those nasty tax surprises at the end of the year.
Making Tax Digital has already come into effect for VAT registered businesses (April 2022), but it’s yet to do so for Income Tax, i.e. those who file for Self Assessment.
The current deadline for MTD Self Assessment is 6th April 2024 (which is actually a year later than planned due to Covid-19). This deadline gives you plenty of time to grab your MTD-compatible software in place.
Whether or not the upcoming MTD Self Assessment changes will apply to you or not depends on how much money you make.
Currently, the threshold for MTD for Income Tax has been set at £10,000. This means that MTD will only apply to you if you have an annual income higher than this figure. If you do, then you’ll be required by HMRC to register and ensure you have MTD-compatible software before the deadline.
If you earn less than the £10k a year threshold, then the MTD changes won’t apply to you. You can carry on filing for Self Assessment as you do now.
Although HMRC isn’t actively supplying businesses and freelancers with free software, they have published a list of MTD-compatible software products. In this list, some of the software products offer free versions that sole traders can use for MTD.
You can see the full list on HMRC’s website, here.
If you’re self-employed and confused by the upcoming MTD changes, then don’t worry. Get in touch with us for some simple, one-off tax advice from one of our accredited accountants. You can learn more here.
Sign up for important updates, deadline reminders and basic tax hacks sent straight to your inbox.