Making Tax Digital for Self-Assessment Starter Guide
Why have we written this post?
There are significant changes (Making Tax Digital) coming to the world of tax returns in the very near future. Whilst they do not impact everyone straight away, it is likely that these changes will impact more and more people as time goes. We believe everyone has the right to not only understand these changes but feel confident that they can comply with the rules, without paying an "arm and a leg" to do so.
We hope this guide helps people get a better foundation knowledge of MTD and how it may impact them or those around them.
What is self-assessment?
Self-Assessment has been the standard method for people to report their UK income tax liabilities to HMRC for the last 30 years. The principal of it is that any UK taxpayer with untaxed income above £1,000, must consider their reporting obligations. They 'self-assess’ their income for the relevant tax year which is reported to HMRC, and any taxes duly paid. This is often done with the help of an accountant or tax professional. It places the onus on the taxpayer to ensure they accurately disclose their income and pay the right amount of tax.
What is MTD?
MTD stands for Making Tax Digital. It’s the project name designated to the task of bringing the tax process into the 21st century, using modern tech to improve the way records are prepared, stored and filed with HMRC.
MTD was implemented first within the world of VAT, and will now be phased into the Self-Assessment process in the coming years. In a nutshell, MTD requires taxpayers to:
• maintain digital records
• use MTD compliant software
• submit updates every quarter, bringing the tax system closer to real-time
What’s going to change?
At the time of writing, the earliest changes which will come into effect will have an impact on self-employed individuals and landlords from:
• 6 April 2026 if you have an annual business or property income of more than £50,000
• April 2027 if you have an annual business or property income of more than £30,000
The expectation will be for HMRC to then start casting a wider net, to eventually include all businesses. However, it’s unclear how far away that might actually be.
What should I do?
If you’re unsure on how MTD might impact you, or have any other queries, we’d be happy to discuss your circumstances and help you make a plan for the future of your business.
Like all of our blogs, we aim to help make the world of tax more understandable to those it impacts. If one person reads this and feels they have learned something, we consider that a success. If this blog has helped you, please let us know by providing feedback below:
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