Making Tax Digital for Income Tax

Making Tax Digital for Income Tax

For many of us, this last year has been one of the most challenging. There are a number of things that undoubtedly contributed to this - one being the switch to remote working. While adapting to this new way of working, there is also the steep learning curve of using Microsoft Teams, Zoom, and many other digital tools in our everyday lives. 

Although this digital transformation and new ways of communicating have happened at rapid pace, and in such a short space of time, it never ceases to amaze how adaptable people can be when faced with new challenges.

It was inevitable that the world was going to shift to a more automated way of living, but the transformation to an ever-expanding digital future has been hastened by the Covid-19 pandemic. To this end, the world of taxation and accounting is no different.

Since it was announced in 2015, Making Tax Digital (MTD) has been a controversial HMRC topic, beset with delays and criticisms.

Despite this, MTD is an important part of the Government’s plan to make it easier for both individuals and businesses to get their tax right. They have pronounced that their ambition is ‘to become one of the most digitally advanced tax administrations in the world’.

With this in mind, self-employed businesses and landlords with annual business (taxable turnover) or property income above £10,000 will be required to follow the rules for MTD for Income Tax from their next accountancy period starting on or after 6 April 2023.

As is similar to the current MTD for VAT process, MTD for Income Tax will require digital records to be kept for income and expenses. HMRC will require four quarterly submissions and a final declaration each year, effectively ending the annual tax return.

Many more consultations will no doubt take place between the Government, businesses and the Accountancy and Tax governing bodies in the next two years before a mandatory roll-out begins, but it has never been more important to start thinking about how taxpayers will deal with the increase in compliance procedures.

These tools for a digital age will bring many benefits in streamlining taxpayers’ affairs and it is crucial we are ready to face this new challenge.

Here at Azets, our Digital Transformation strategy is at the forefront of our business and we are committed to assisting and guiding you when MTD for Income Tax is finally introduced.

Digital change can be difficult but if we embrace this together, as we have seen over the last year, it will ultimately benefit us all.

If you have any queries regarding Digital Transformation or Making Tax Digital and how to prepare your business now, please get in touch with your usual Azets contact.