What you need to know about quarterly updates for Making Tax Digital for Income Tax Self Assessment
Just under two years sounds like a pretty long time. But time hasn't exactly run at its natural rhythm in recent years. With the closures, the days dragged on forever. Then the days, weeks and months flew by as pubs, stores and restaurants reopened.
While this isn't the best place to think about the ebb and flow of time, it's worth considering when looking at April 2024 as the launch date for Making Tax Digital for income tax self-assessment (MTD for ITSA). It may feel far away, but it will be here before you know it.
From this date, landlords and self-employed people with annual income over £10,000 will have to comply with the MTD rules. This means quarterly updates must be sent to HMRC via MTD compliant software, as well as an End of Period Statement (EOPS) and a closing statement once a year.
For affected clients, this is a significant change that may cause them difficulty adjusting to the new system, although the long-term benefits - from increased efficiency to more accurate tax returns - make the transition worthwhile.
Below is a brief overview of everything you and your clients need to know about the changes to quarterly updates.
Why make the switch to quarterly updates?
Switching to quarterly updates instead of a single annual return may sound like a bunch of extra work at first, but it actually requires less information than annual updates.
Quarterly updates also have the added benefit of showing that taxpayers are keeping their records up to date on a regular basis. Another piece of good news is that individuals can receive an estimate of taxes payable based on their reported income. This gives these clients more time to prepare for their annual bill.
How do you send quarterly updates?
You can send quarterly updates to HMRC using MTD-compatible software - more information can be found here. This should be a seamless process, provided your records are up to date, as the accounting software will help collate the required information.
Who can file quarterly updates?
Affected taxpayers or their tax advisors or accountants can submit quarterly updates for MTD for ITSA. However, tax advisors or accountants must be authorized to do so on behalf of their clients. Your accounting software vendor can also provide more information.
When do you need to submit the quarterly updates?
Quarterly updates must be submitted within one month of the end of the period. For example, an update for the quarterly period from April 6 to July 5 must be submitted by August 5.
Here is a complete list of the standard quarterly periods and deadlines:
- April 6 to July 5
- July 6 to October 5
- October 6 to January 5
- January 6 to April 5
- August 5
- November 5
- February 5
- May 5
HMRC has also announced that you can use calendar quarters at a later date and will inform taxpayers when this is possible.
What about the EOPS and the final return?
The EOPS must include all accounting adjustments and reliefs, and taxpayers must certify that all information submitted is complete and accurate.
The final return must also include other types of income, such as investments or savings. Any claims for relief must also be filed here. Both the EOPS and the final return are due on January 31 of the following tax year, along with payment.
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