What is Making Tax Digital?
Making Tax Digital is all about helping taxpayers transition from paper tax records and files to a fully digital experience. Some of the digital improvements HMRC has implemented, such as your digital tax account and completing your tax return online, are likely to be familiar to you.
When will this apply?
The first set of guidelines will take effect in April 2023. In barely over a year. That implies you can continue to file once a year for the current tax year (2021-22) and the next tax year (2022-23). The tax year 2023-24 will be substantially different. April, May, and June 2023 will be the first quarter in which you must file a digital return. Because of the oddity of the tax year-end date, which actually runs from April 6 to July 5, 2023.
Because this will not take effect until 2023, you will have plenty of time to prepare and organise yourself before the change takes effect.
What you need to do:
The process is simple but can get quite complex if done incorrectly, and with this in mind, we have outlined the main things you should do in the following list:
- You must register for MTD for ITSA by April 6, 2023, or have your accountant do so on your behalf. This must be done even if you have already signed up for self-assessment;
- You'll also need to keep digital records, which is crucial;
- You will be required to give HMRC quarterly digital updates on your property income and expenses. The first quarterly report must be submitted by August 5, 2023.
How do I sign up for MTD?
Signing up for MTD is fairly simple and does not require too much effort. Read on to find out how to get started:
- MTD is now available for landlords to sign up for on the government's website;
- You will need to utilise software that's compatible with the government's system first;
- Your National Insurance number, as well as your Unique Tax Reference number, will be required (this can be found on your last tax bill);
- You'll also need your Government Gateway user ID and password, which you may either use from your last self-assessment return or establish when you join up;
- Then all you have to do is click the Sign Up Now button and fill out the form.
Are there any penalties for missing MTD deadlines?
Landlords and property management businesses will have up to a month after each quarter's end to submit their MTD data.
By the 31st day after the end of the tax year to which the return pertains, a statement that the filings are proper must be signed. This should give you plenty of time to make any necessary revisions.
MTD fines for taxpayers are still being considered by the government.
Taxpayers will be penalised if they do not comply with MTD, which mostly involves late submission of accounts and returns. The number of penalty points is determined by how late the submission is, with the first penalty point being assessed after 15 days.
For repeated late filers, the penalties accumulate over time, much like points on a driver's licence. After that, a monetary penalty is levied. The penalty points are restored to zero after two years.
Late payment penalties kick in after 15 days, double after 30 days, and keep increasing as time goes on. From the due date forward, interest is imposed on outstanding sums.
The good news is that the government is likely to provide a one-year grace period until the MTD plan is fully integrated into all taxpayers' thinking.
Will MTD affect UK landlords with foreign properties?
MTD for Landlords will be required for UK resident landlords with foreign property rental revenue of £10,000 or more per year. Depending on the currency rate you employ, it may be more difficult to determine if your rental revenue exceeds the threshold. If you're unsure, see HMRC's annual exchange rates.
New tax regulations and schemes can be confusing for businesses and individuals. We aim to ease your stress by offering remote accounting services. For more information on MTD or for other business and accounting queries, please contact Persona Finance at [email@example.com]