Follow the rules for Making Tax Digital for Income Tax

Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2023.

Contents

1. Who can follow the rules

2. When to follow the rules

3. Keeping digital records

4. Signing up

5. Sending updates using software

6. Finalising your business income

7. Submitting a final declaration

To follow the rules for Making Tax Digital for Income Tax, you’ll need to:

• keep digital business records

• get compatible software

• sign up

• send business income and expenses updates

• finalise your business income

• submit a final declaration instead of a Self Assessment tax return

Who can follow the rules

You can follow the rules voluntarily if all of the following apply:

• you’re a UK resident

• you’re registered for Self Assessment and your returns and payments are up to date

• you’re a sole trader with income from one business only or a landlord who rents out UK property (or both)

You cannot sign up if you need to report:

• income from any other sources

• any taxable payments you make or that you claim tax relief on

When to follow the rules

You can choose to follow the rules voluntarily now.

You must follow the rules for your next accounting period that starts on or after 6 April 2023, if your taxable turnover from your self-employed business or income from property is above £10,000.

Keeping digital records

You’ll need to keep digital records of all your business income and expenses - this includes income from self employment or property.

You should start to keep digital records at the start of the accounting period you are signing up for. You’ll need to do this for the whole of the accounting period.

You’ll use software to keep records and send updates. Contact us for help and advice

Signing up

You can sign up now for your current or next accounting period.

You can sign up your business for Making Tax Digital for Income Tax, or if you’re an agent there is a different way to sign up your client.

Sending updates using software

After your software is authorised you’ll send updates to HMRC every 3 months. Updates are summaries of your business income and expenses. Your software will tell you when and how to send the updates.

Finalising your business income

At the end of your accounting period you need to finalise your business income in a declaration. This is where you confirm that the updates you sent are correct and make any accounting adjustments.

Submitting a final declaration

The final declaration replaces the Self Assessment tax return.

Submit your final declaration after the end of the tax year it applies to. This is where you can tell HMRC about any personal income you have or reliefs you claim.

You must submit your final declaration and pay the tax you owe by 31 January the following tax year.

Contact us for help and advice