Making Tax Digital for Income Tax will launch properly in April 2023 for self-employed people and landlords who make over £10,000 annually.
So while it’s not compulsory (yet), if you fill in a Self Assessment tax return, you can sign up for a digital tax returns pilot scheme.
The pilot lets you keep records digitally and send Income Tax updates to HMRC instead of filing a Self Assessment tax return. The government estimates that so far, around 30 per cent of businesses and landlords have signed up voluntarily.
HMRC says it will lead to a more real-time system, which lets you see how much Income Tax you owe as you go. Signing up will also give you time to get used to the process before the 2023 deadline. Both sole traders with income from one business and landlords who rent out UK property (excluding furnished holiday lettings) can sign up.
You’ll need to use compatible software to keep records and send an income and expenses summary to HMRC every three months. You’ll be able to see estimates of how much tax you’ll owe. At the end of the accounting year, you’ll send a final report and your tax for the year will be calculated. This is the point at which you’ll claim any allowances and reliefs.