In a bid to simplify tax procedures, HMRC has expanded the Making Tax Digital (MTD) initiative, focusing on individuals earning over £30,000. This primarily affects landlords and sole traders, who now need to manage digital records and submit quarterly statements.
Transitioning from Annual to Quarterly Reporting:
The revamped Making Tax Digital process replaces the traditional annual tax return with a more frequent reporting system. Self-employed individuals with income above £30,000 must use compatible software to report financial activity four times a year, including a Final Declaration instead of the yearly tax return.
This transition aims to enhance efficiency for both HMRC and the self-employed. However, nearly one million people adapting to this new reporting method may face challenges. Priority will likely be given to specific HMRC inquiries, potentially causing delays for those grappling with the quarterly reporting process.
Leveraging Digitalisation for Tax Compliance:
HMRC asserts that MTD taps into digitalisation to streamline tax compliance. This aligns with practices in other countries, aiming to reduce errors contributing to the tax gap—currently estimated at 18.5%, equivalent to £5 billion, for Self-assessment businesses.
The Benefits of Digitalisation for Self-Employed Individuals:
The initiative emphasises various advantages of digitalisation for self-employed individuals, particularly landlords and sole traders, including:
- Minimising errors
- Saving time during end-of-year tax submissions
- Increased productivity
As the implementation progresses, HMRC must ensure that MTD remains comprehensive and user-friendly. Adequate support is essential for those navigating the new reporting methods, especially the target audience of self-employed individuals, including landlords and sole traders.
For more information about this topic, follow this link: HMRC to extend Making Tax Digital to 1m landlords and sole traders… and expert warns it could cause big delays | This is Money
