MTD vs Your tax Self-Assessment - understanding the core differences

As you may know, HMRC is changing the rules and process for landlords and self-employed people to submit their tax Self-Assessment. Over the next couple of years, millions of Self-Assessment taxpayers will need to get software and submit to digital tax returns as part of HMRC’s Making Tax Digital (MTD) programme.

The big changes when it comes to Making Tax Digital over the traditional form of tax return, are in the number of tax submissions and the digital submission process that MTD offers. Firstly, you will need to complete not one but at least five tax submissions per year ‒ one every quarter with a final one to confirm your taxes for the year. These returns also need to be submitted via HMRC-recognised tax software.

Although it may seem like a big change, and it can be potentially daunting for many self-employed people, tradespeople, sole traders, and landlords out there, it doesn’t need to be feared. With the right software, MTD can be made simple as there are a lot of similarities between the new Making Tax Digital rules and the traditional form of self-assessments or returns.

Similarities Between MTD and the traditional tax Self-Assessment

While the process may be different, the tax rules are exactly the same for self-assessment. You’ll still need to have a record of the same income and expenses, so it’s important to keep hold of your receipts.

However that being said - some MTD tax software, such as our own APARI software, allows you to upload bank statements, tag relevant transactions and even attach photos of receipts, making the process much quicker and easier than using a spreadsheet (though you can still upload a spreadsheet if that’s what you’re into). If you are yet to set up a dedicated bank account, however, now is the time. With MTD coming into full force, setting up a bank account for your business or rental income will make the process much easier later on down the line.

Through MTD, and through tools like out APARI software, if you need to send information like employment income, pension contributions or charitable donations, you can still do this as you would on your traditional tax self-assessment. You can include these as you go or at the end of the year.

Speaking of the end of the year, the deadline for finalising your taxes is still the same under the MTD guidelines: January 31st. So you don’t need to worry about another new date. You will also pay your tax bill at the same times and in just the same way, including Payments on Account for the upcoming year.

What are the Benefits of Making Tax Digital?

Completing five tax submissions a year may sound like a hassle but it’s not without its benefits - completing regular tax self assessments, rather than one big tax return at the end of the year, will help spread the workload out and make it easier to manage. Instead of the January panic that many landlords or self-employed professionals experience, you’ll simply have to upload your transactions, check the details, and click submit once every three months. At the end of the year, you may just need to confirm what you have already submitted quarterly, allowing you to finalise everything much earlier than you do with the annual tax self-assessment.

Since you are also using software to collate your account information, calculate your tax, and submit, you’ll no longer need an accountant, saving you a fortune in accountancy fees. Of course, an accountant may still be useful in some circumstances, such as getting advice or helping you plan, but you can use them sparingly when you need to rather than feeling forced to hand over large sums every year.

By regularly updating your accounts, you’ll also gain a real-time estimate of your final tax bill, helping you save the right amount of money to pay in January. What this means is invaluable - no more nasty surprises when you come to file your return! You have full visibility, knowing what you will owe on your tax returns and when.

What is more, with all your account information in one place, you will be able to quickly and easily use your tax software to see your yield per property, performance, and plan for upcoming expenses. If you are a landlord and you decide to use our APARI software, then we will even notify you when you need to renew contracts, safety certificates, and other documentation, helping you keep on top of your property management. We very much see it as our role to not only make your tax self-assessment or tax return as easy as possible, but to help you stay on top of your paperwork, making tax doable.

Making Tax doable

As you can see, while MTD may cause some headaches in the short term, once you get to grips with it you will begin to see a range of benefits. With more information within your control, you can plan your finances better, gain a better overview of your expenses, (if you are a landlord) rental income and save both time and money.

APARI is the only product that’s designed for taxpayers (not accountants!) and is HMRC-recognised for both MTD tax returns and the traditional annual tax self-assessment.

If you would like to join the thousands of users who have already signed up to APARI and get to grips with Making Tax Digital ahead of time.

Alternatively, do you want to know more about MTD and what it will mean to start submitting your tax self-assessment online? We created the Ultimate Guide to Making Tax Digital for YOU!