MTD update
Newsletter issue - July 2018.
HMRC's pilot of Making Tax Digital (MTD) for income tax has been extended and is now able to accept quarterly updates from individual landlords with simple tax affairs. Agents can also sign up clients to pilot.
The latest extension means that certain taxpayers will be able to opt out of the current self-assessment regime and use software to report their income tax if at least one of the following applies:
- the taxpayer is a sole trader with income from one business; or
- they rent out only UK property but not as furnished holiday lettings.
Those who do not qualify must continue to report their income to HMRC via a self-assessment return in the usual way.
Taxpayers who sign up to report digitally will send updated information directly to HMRC every three months during the course of the year and will be able to view up-to-date 'best estimates' of their tax liability as they go along. A final report will be submitted to confirm income and expenses at the end of the accounting year. If the taxpayer needs to claim allowances and reliefs, he or she can do this within that final report. The taxpayer will then be able to see a full tax calculation for the year.
In order to join the pilot, the taxpayer must be able to keep digital records of their business transactions, and commit to sending income tax updates to HMRC at least on a quarterly basis using MTD-compliant software.
MTD for VAT is currently expected to commence from 1 April 2019 for VAT registered organisations with an annual turnover in excess of £85,000 a year. No date has yet been set for when the MTD scheme may be formally introduced on a mandatory basis for income tax purposes, but it will not be before 2020, and probably later than that due to HMRC's current focus on Brexit preparations.