Making Tax Digital For Income Tax, What You Need To Know
What is (MTD)
Making Tax Digital (MTD) is a UK government initiative that aims to make it easier for individuals and businesses to keep track of their tax affairs and pay their taxes digitally.
The goal is to improve the accuracy and efficiency of tax reporting and reduce errors and fraud.
So when does (MTD) starts?
MTD starts From April 2021, it applies to any with self-assessment tax returns.
This includes Sole traders, landlords, and individuals with taxable income above £10,000 per year.
You need to keep digital records of your income and expenditure and to file your tax returns online.
What are key things that you need to know about MTD for income tax?
- MTD applies only if your annual income is more than £10,000.
- You will have to keep digital records of your income and expenditure
- You will also need to keep these records for at least six years.
- You will need to file your tax return online using software that is compatible with MTD.
- You will need to file five tax return, quarterly and one finale returns by the end of the tax year.
- If you are unable to use software due to disability or other reasons, you may be able to use an alternative method of submitting your tax information to HMRC.
What software can I use for MTD
You can use a range of software to comply with MTD, including cloud-based solutions such as QuickBooks FreeAgent and Xero, or desktop software such as Sage. HMRC has a list of approved software providers on its website.
What if I fail to comply with MTD
You need to start preparing for MTD now.
This includes making sure you have the necessary software and digital records in place, and getting up to speed with the new process. Failure to comply with MTD could result in penalties from HMRC.
Importance of MTD
Overall, MTD for income tax is designed to make it easier and more efficient for individuals and businesses to manage their tax affairs and pay their taxes.
If you are required to file a self-assessment tax return, it is important that you familiarize yourself with the requirements of MTD and ensure that you are prepared to comply with them.