After months of anticipation, HMRC has finally released more Making Tax Digital guidance for income tax self-assessment, which clarifies how taxpayers will fulfil the obligations but leaves several concerns unexplained.
Just before the long weekend, HMRC issued four sets of instructions to help people understand the Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) procedure and how to actually comply with the criteria.
Although the guideline does provide some clarification regarding who must sign up and who need not, it still leaves agents in the dark about contentious matters like the choice to utilise calendar quarter dates for the quarterly reports.
- Check if you can sign up for Making Tax Digital for Income Tax
- Using Making Tax Digital for Income Tax
- Sign up as an individual for Making Tax Digital for Income Tax
- Check when to sign up for Making Tax Digital for Income Tax
The materials stay true to the project’s fundamental tenets: taxpayers must abide by the rules if they are self-assessment registered, get income from self-employment, rental property, or both, and have qualifying income totaling more than £10,000.
However, the guidance does provide more explanation on certain key points that accountants frequently raise.
Those eligible to register for MTD ITSA
In accordance with the Check if you may sign up for MTD ITSA guidance, non-doms are exempt from the rules relating to their overseas revenue. Their qualifying income would only come from their self-employment income in the UK.
However, this advice does include the others who are not eligible to register. A trustee, such as a charitable trustee or a trustee of an unregistered pension plan, a personal representative of a decedent, a Lloyd’s member in connection with their underwriting activity, and a non-resident company are some examples. Nevertheless, if their eligible income exceeds £10,000. they can voluntarily enrol.
The role of the personal account is also expected to increase. After finalising their business revenue, businesses “may need to give HMRC details on personal income sources,” according to the guidance. Savings or dividend income may be considered here.
When to register
The Check when to sign up for Making Tax Digital for Income Tax guideline begins by reiterating that starting on April 6, 2024, the MTD ITSA requirements must be fulfilled. Taxpayers who qualify for the MTD ITSA must first file their 2022–23 self-assessment tax return by January 31st, 2024. HMRC continues by stating that it will examine that return and determine whether the taxpayer has a qualifying income of more than £10,000. The taxpayer will then receive a notification from HMRC stating that they must register and that they or their representative must then locate and authorise software that is compatible.
After April 6, 2023, landlords and self-employed individuals do not need to comply with the MTD ITSA rules until after they have filed their first self-assessment tax return. Nevertheless, they are free to enrol.
Additionally, it reiterates that partnerships will not be required to join MTD ITSA until 6 April 2025.
Using MTD ITSA
According to the Using Making Tax Digital for Income Tax advice, taxpayers must go through the software authorisation process again every 18 months. Similar events are taking place right now with MTD for VAT. Taxpayers will be prompted on this by the software.
In the meantime, the basis period reform’s problems regarding calendar months are largely avoided by this guideline. During the most recent MTD Bootcamp, this question was raised numerous times.
HMRC stated: “At a later stage, you will be able to select to use calendar quarters instead of quarters ending on the 5th day of the month” when addressing when to deliver quarterly updates.
The advice, however, merely states, “We will explain how to accomplish this when it is accessible.” HMRC will thus elaborate on this.
To keep up to date with more news like this, Click Here to sign up to our newsletter by visiting our website.
