The way that some self-employed taxpayers report their business profits to HMRC is set to change in April 2023 under the Making Tax Digital (MTD) for business regime, when it begins to apply to Income Tax reporting.
MTD for Income Tax Self-Assessment
- Under MTD it is proposed that the Self-Assessment tax return will be replaced by five new reporting obligations made during and after the tax year. There will be quarterly updates required and a year-end final declaration.
- This measure is due to commence for accounting periods starting on or after 6 April 2023 for self-employed businesses and landlords with business turnover above £10,000.
- The first tax return under such a system is due in the fourth month of the accounting period. You will then have to file with HMRC every three months. For example, if you have a 5 April year end, your first return will be for the quarter ending 5 July.
- Your software should prompt you when to file.
- You will be then able to see a year-to-date calculation of the tax owed based on the information provided.
- Full details of deadlines are to be confirmed by HMRC, but from draft regulations released in February 2021, it appears reports will be due within one month of each business quarter-end.
- If you are not already using software for your record-keeping/accounting, you will need to learn how to use a spreadsheet or some type of accounting software or App which is MTD compliant.
- You will need a reliable internet connection and a facility to store your electronic data.