Possible major change to how we pay our income tax from tax year 2029

poseidon1

DRS1 said:

I have to say that I thought quarterly reporting under MTD was almost certain to lead to quarterly payment of tax.  But could it lead to quarterly changes to your tax code?  This feels like another complication to an already complicated system.

My impression was MTD (intially) was only about extracting tax from the self employed and landlords on a  more frequent basis than the current half yearly payment on account system. 

However guidance to landlords  in the article below (and all other sources related to MTD) suggest MTD is  at this stage only an additional reporting requirement, with tax still only being paid on the usual half yearly cycle so makes me wonder what's the point?

Year end self assessment returns for all non MTD income and  capital gains still necessary, so appears MTD amounts to just an extra  layer of reporting  on a quarterly basis ( at additional cost), but apparently no acceleration in the tax collected. As regards the underlying rationale behind MTD therefore, I am waiting for the other shoe to drop.

https://www.totallandlordinsurance.co.uk/knowledge-centre/what-is-making-tax-digital-mtd-a-comprehensive-guide-for-landlords#:~:text=What income is excluded?,to separate tax reporting requirements.


Given the above, clearly there is no effect on tax codes  by virtue of the MTD system at this stage. However the changes proposed from 2029 onwards to PAYE and self assessment implies  ( to me ) that MTD reporting, may interact   (in some way) with  the new PAYE adjustment proposal to capture self assessed income earlier.

Hopefully all will become clear during the consultation process next year, unless any other forum member has additional insights on MTD.

DRS1

poseidon1 said:

DRS1 said:

I have to say that I thought quarterly reporting under MTD was almost certain to lead to quarterly payment of tax.  But could it lead to quarterly changes to your tax code?  This feels like another complication to an already complicated system.

My impression was MTD (intially) was only about extracting tax from the self employed and landlords on a  more frequent basis than the current half yearly payment on account system. 

However guidance to landlords  in the article below (and all other sources related to MTD) suggest MTD is  at this stage only an additional reporting requirement, with tax still only being paid on the usual half yearly cycle so makes me wonder what's the point?
I think your initial thought will come true eventually perhaps through this PAYE change.  What is tricky is that the quarterly reports only cover certain income so they are either going to need to extend it to cover all your income or they are still going to need to do an end year wrap up and a payment on account regime to cover what is not reported quarterly.

Year end self assessment returns for all non MTD income and  capital gains still necessary, so appears MTD amounts to just an extra  layer of reporting  on a quarterly basis ( at additional cost), but apparently no acceleration in the tax collected. As regards the underlying rationale behind MTD therefore, I am waiting for the other shoe to drop.

https://www.totallandlordinsurance.co.uk/knowledge-centre/what-is-making-tax-digital-mtd-a-comprehensive-guide-for-landlords#:~:text=What income is excluded?,to separate tax reporting requirements.

Under MTD you come out of the old self assessment system so they are devising a new way to report the end of year figures.  I don't know what that will look like and I am dreading that it will involve some complicated spreadsheet with none of the explanatory notes you have under the old system.

That article says you pay tax the same as before but even there things may change.  I get a self assessment statement this time of year and this year's one has confused me no end.  The payments on account for 25/6 appear but then have a credit against them saying Transferred to Digital.  If I believe the statement I only have to pay the balancing payment by 31 January 2026.  So am I meant to pay the payments on account as well?  Do I get a separate demand for them?  Do I have to pay them to some other account?  With some other reference?  I feel a nice long call to HMRC coming on.

Given the above, clearly there is no effect on tax codes  by virtue of the MTD system at this stage. However the changes proposed from 2029 onwards to PAYE and self assessment implies  ( to me ) that MTD reporting, may interact   (in some way) with  the new PAYE adjustment proposal to capture self assessed income earlier.

Hopefully all will become clear during the consultation process next year, unless any other forum member has additional insights on MTD.

Some thoughts in bold

One other thought is that MTD does not apply to partnerships so there is a whole group of people (lawyers accountants actuaries etc) who have escaped it so far  They must account for a lot more tax take than the one man bands caught by MTD so far. 

MattMattMattUK

They should just shorten the deadline to file to three months rather than nine and bring the payment on account forward as well. As for this it will not work for me, my dividend tax liability is greater than my entire PAYE earnings. 

pegeen2010

I am retired and have been receiving basic State Pension plus my basic State Pension from when I lived abroad. According to my self assessments I am having to pay income tax on the total. So indirectly I have been taxed on my UK State Pension. How will future taxation affect me?

eskbanker

pegeen2010 said:

I am retired and have been receiving basic State Pension plus my basic State Pension from when I lived abroad. According to my self assessments I am having to pay income tax on the total. So indirectly I have been taxed on my UK State Pension. How will future taxation affect me?

This thread is about changes to tax collection for those with PAYE deductions, so if neither of your income streams is PAYE then you're unaffected by the proposed change.