Go digital with your on-demand income taxes – How to prepare for MTD in 2021

How to prepare for MTD in 2021 as a rideshare driver in London
1000 500 Balazs Szekely

On April 1st 2021, the soft-landing period for Making Tax Digital (MTD) for VAT will come to an end. In essence,

anyone currently following the rules of MTD for VAT will need to make sure that the software they use sends information directly to HMRC.

This is the first step in a series of incoming tax changes that will impact how you file your tax returns to HMRC.

You have until January 2023 to implement these changes as part of MTD for Income Tax, but the longer you leave it, the harder it will be to adjust.

Don’t take our word for it, though. Mike Parkes of GoSimpleTax sets the record straight on how you should prepare for these changes.

What is MTD?

MTD is a government initiative designed to digitalise taxes in the UK.

Going digital makes assessing income more effective, and easier to get your taxes right. It’s better for the economy too – avoidable mistakes have cost the Exchequer £8.5bn between 2018 and 2019, according to HMRC.

How does MTD affect self-employed rideshare drivers?

The initiative will extend to on-demand drivers with an annual income of over £10,000, starting  from 2023. In other words,

you’ll be required to use compatible software to keep digital records and send HMRC updates for your Income Tax.

This will mark the end of the free HMRC tax return submission tool – instead, you’ll need to choose an approved platform that’s compatible with MTD for Income Tax.

Say goodbye to the Self Assessment tax return

Instead of the dreaded Self Assessment tax return, HMRC will ask you to submit:

  • four quarterly updates
  • an end-of-period statement
  • final declaration

If you start using software early, you’ll spend less time on admin under this legislation than you did previously.

What are the quarterly updates?

At least every three months, you’ll need to send HMRC a statement of your business income and expenses, as well as any property income that you earn.

This allows HMRC to present you with a more up-to-date forecast on how much tax you’ll owe.

Software will make this process easy, as you can log income and expenditure information in real time.

What are end-of-period statements?

You’ll have to submit an end-of-period statement at the end of your accounting period or tax year.

Preparing this statement will involve a similar process to the current one for Self Assessment tax returns.

What is the final declaration?

This is where you confirm that the figures submitted to HMRC are final and correct.

This submission will then be used as the basis to calculate any tax you need to pay.

Why prepare for MTD now?

Self-employed rideshare drivers have until 2023 before MTD for Income Tax comes into effect. If you leave it too late to sign up for approved software, 2023 could turn out to be a difficult year.

Not only would you need to submit your 2021/22 tax return by 31st January 2023 as normal, but you’d also have to get up to speed with MTD for Income Tax before your first MTD submission. This first submission would most likely be for the period April 6th – June 5th period of 2023, and be due no later than July 5th.

 

2021 is the perfect year to get organised

Get to grips with keeping digital records with an MTD-compatible platform

Splend members enjoy 30% off GoSimpleTax

Upon sign-up, you’ll receive an email with a discount code to be used at checkout.

 

About Splend

We’re Rent to buy specialists enabling on-demand drivers to make money by driving. Our vision is a future where every on-demand driver can be successful.

We can set you up with a brand-new or new-model car on a Rent to buy plan, and provide the training and support you need to become a more profitable, safer, and fulfilled driver.

Don’t take our word for it—Uber drivers rate us excellent on Trustpilot.

Come and say hello at our Member Support Centre at 393 Edgware Road Cricklewood, London,  email us, or say hello on 0333 016 4331

AUTHOR

Balazs Szekely

Maker by nature, writer by profession, and a petrolhead at heart, Balazs is our very own content creator who brings Splend’s voice to life. He’s been a wordsmith his entire career, having seen it all from the print media to radio through online publishing and marketing copywriting. He’s fascinated by things he has yet to fully understand such as photography, ice hockey, and the bizarre art of aquascaping. In his free time you may find him mixing up cocktails for his friends or away from home on a city break. Drop him a line at balazs.szekely@splend.com

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