Making Tax Digital (MTD) for Income Tax requires a little more management and input than the previous method of submitting a Self Assessment tax return. Below we outline the process you will need to follow to comply with HMRC's new way of reporting your income. It is assumed Easy MTD is being used as the MTD for Income Tax solution, and Easy MTD is installed and configured.
| Step | Process | Description |
|---|---|---|
| 1 | Find out your start date |
The date when you need to start using Making Tax Digital for Income Tax, is determined by your qualifying income. You'll be notified by HMRC if and when you're eligible. |
| 2 | Sign up for Making Tax Digital for Income Tax |
Despite HMRC knowing you're eligible for Making Tax Digital for Income Tax and notifying you about this, you still need to sign up for the service. You can do that using the link below: |
| 3 | Start or continue digitally recording certain Income Tax figures |
The income and expenses of each self-employment and/or property income source must be digitally recorded in a spreadsheet, text or CSV file. These figures are submitted each quarter to HMRC - the process is commonly referred to as a quarterly update. Other figures required by HMRC such as annual summary allowances and adjustments, accounting adjustments, brought-forward losses, and personal income, tax reliefs and deductions, can be recorded however you prefer. |
| 4 | Tailor your tax return |
Use the Tailor Tax Return functionality of Easy MTD to determine which components of the tax process are applicable to you. This will give you a clear indication of what you need to complete and your progress during your MTD for Income Tax journey. |
| 5 | Submit quarterly updates |
A quarterly update for each self-employment and/or property income source must be submitted every 3 months. The figures must be recorded digitally in a spreadsheet, text or CSV file to comply with MTD for Income Tax. |
| 6 | Submit brought-forward losses | If any of your self-employment or property income sources have brought-forward losses to report, you submit them to HMRC at any time during the tax year and prior to the submission deadline. |
| 7 | Submit income and expenses adjustments | If any of the income and expenses figures submitted with the final (4th) quarterly update were incorrect, they can be adjusted and submitted to HMRC at the end of the tax year and prior to the submission deadline. |
| 8 | Submit annual summaries | Annual summaries must be submitted to HMRC at the end of the tax year and prior to the submission deadline for each self-employment and property income source. These contain allowance and adjustment figures. |
| 9 | Submit personal income, tax reliefs and deductions | Income, tax relief and deduction figures that are associated with you personally and not your self-employment or property income sources, must be submitted to HMRC. Some can be submitted during the tax year while others can only be submitted at the end and prior to the submission deadline. Certain figures may already be held by HMRC and no submission is necessary if they are correct. |
| 10 | Make the final declaration |
When all necessary figures have been submitted and HMRC consider them to be correct and without error, you can review the final tax calculation produced by HMRC. When you're happy with the calculation you make a final declaration. This simply involves ticking a checkbox to indicate you agree with HMRC's calculation, and clicking a Make Final Declaration button that finalises your tax return for the year. That's it - you're done! |