What is it ?
MTD for Income Tax Self Assessment is an initiative by the UK government to modernise the tax system.
Why?
The government aims to reduce errors and close the tax gap (the tax gap is the difference between the tax due and the tax actually paid to HMRC) .
Who Does it Affect ?
At the moment people working as sole traders and landlords (either one of both of these). Income from partnerships is not part of by MTD for SA (this is planned in the future).
When Does it Take Effect ?
The start dates for are staggered according to your income:
If your income (before expenses and tax are deducted) from being a sole trader and/or landlord is over :
£50,000 in 2024/25 tax year you will use MTD from 6th April 2026
£30,000 in 2025/26 tax year you will use MTD from 6th April 2027
£20,000 in 2026/27 tax year the government is looking at introducing MTD from 6th April 2028
If your income is above the threshold, HMRC will write to you informing that you need to start using MTD.
How Does it Work ?
MTD for Income Tax requires that you :
Make 4 Quarterly Submissions for your self-employment and/or landlord income using HMRC recognised software.
Make a 5th final submission. This includes all your earnings for the tax year and any required adjustments (of a similar style to the current annual self-assessment).
The final tax bill is calculated once the 5th submission is made. Payments are due in July and January as per the existing times for income tax collection.
For more information go to http://hmrc.gov.uk or contact me barnowlbookkeeping@gmail.com 07771 333324
Barnowl Bookkeeping http://www.barnowl-bookkeeping.co.uk helping small businesses in King’s Lynn, Wisbech, Swaffham, North Norfolk Coast, Downham Market and the surrounding areas.