Making Tax Digital for Self Employed and Landlords
Published / Last Updated on 07/10/2020
Making Tax Digital is a government initiative to make HMRC and the UK tax reporting and collection system the most advanced in the world.
It is estimated that HMRC collects 95% of taxes that are due but 5% goes unreported or missing or ‘black market’ (cash in hand deals etc). This costs the government purse in excess of £30bn a year, hence the Making Tax Digital (MTD) programme.
Making Tax Digital (MDT) Timeline:
April 2013 Payroll
Real Time Information (RTI) reporting for payroll, RTI filing with 'Full Payment Submission' (FPS) and the 'Employer Payment Summary' (EPS), where employers must send electronically, in real time information about employees names, employee pay, hourly rates, hours works, national insurance deductions and income taxes due and paid.
April 2019 VAT
All VAT registered businesses with taxable income above the VAT registration threshold of £85,000 where required to maintain booking keeping records electronically, using approved bookkeeping software and submit VAT returns electronically with all the usual business records kept. Some larger businesses or more complex businesses were allowed to defer compliance but this closes in 2021.
April 2021 VAT
All VAT registered businesses with taxable income above the VAT threshold including those that had deferred complying with the MTD scheme must comply by this date.
April 2022 VAT
All smaller VAT registered businesses with taxable income BELOW the VAT threshold must comply with MTD by this date.
April 2023 Income Taxes – Self Employed and Landlords
All self employed businesses and landlords (rental income above £10,000pa) must comply with MTD.
Make no mistake, if you are self employed or if you are a landlord, you need to start thinking about keeping all business and property records accurately, using an approved bookkeeping software package, probably with an ‘open banking’ link to your bank accounts to ensure all income and expenses are imported and recorded in the software to enable accurate submission of income, taxes and returns in an electronic format by this date.
The Future for MTD
Open banking access by HMRC or approved software packages to all of your banking records, corporation taxes, income taxes and self assessment for all with MTD is coming.
