What is a Final Declaration? Reporting for MTD for Income Tax

From April 2024, ‘Final Declarations’ will be a requirement for HMRC’s Making Tax Digital for Income Tax initiative.

Illustrated accountant holds pen up to line graph on whiteboard.

What is a Final Declaration?

‘Final Declaration’ is a term used by HMRC to describe the process a taxpayer goes through to finalise their end-of-year position for tax and determine what they owe. Final Declaration used to be known as ‘crystallisation.’

As part of the government’s planned Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) rules, the Final Declaration will replace the current annual Self Assessment Tax Return.

MTD for ITSA means the self employed and landlords earning above £10,000 will need to use MTD-compatible software to keep digital records and submit the following to HMRC:

When will the Final Declaration process be introduced?

Submitting a Final Declaration will be part of the new MTD for ITSA rules, which come into effect in April 2024.

Do I need accounting software to submit a Final Declaration?

The simplest way to submit your Final Declaration is by using HMRC-approved MTD software.

You must have this in place by April 2024, but the sooner you start using cloud-accounting software to keep digital records, the smoother the transition to MTD for ITSA will be.

Besides ensuring that you’re compliant with the new HMRC rules, choosing the right cloud-accounting software will help you to take control of your finances and run a healthy business. If you choose the right MTD software, you’ll benefit from additional features such as invoice generation, bank reconciliation, sending quotes and capturing bills and receipts.

Before starting the Final Declaration process

Before starting the Final Declaration process, you need to make sure that you have completed the following steps:

  • Submitted all four quarterly updates for the tax year
  • Finalised your End of Period Statement (EOPS) for all your businesses
  • Provided your entire income for the relevant tax year e.g. interest and dividends
  • Provided any relevant additional information

What information do I need to provide in a Final Declaration?

You must complete the steps above before submitting your Final Declaration.

There is no specific information you need to include in the Final Declaration itself, as it is simply a declaration statement to ‘accept’ your final tax position for the year, which is calculated by HMRC.

When do I submit a Final Declaration?

The Final Declaration can only be made once the relevant UK tax year has ended and must be made by 31 January following the end of the tax year.

You can submit non-business income information to HMRC at any point during the year, but it must be done before you make the Final Declaration.

How do I submit a Final Declaration?

The simplest way to submit your Final Declaration is by using HMRC-approved MTD software.

Can I make changes to a Final Declaration after submission?

If you need to make any changes to your Final Declaration you have 12 months from the filing deadline.

What happens if I miss the deadline for submitting a Final Declaration?

If you miss the deadline for submitting your Final Declaration or do not pay the tax you owe on time, you may need to pay a penalty. A new points-based penalty system for MTD for ITSA will come into effect from April 2024.

Prepare for MTD for ITSA today

The sooner you start to prepare, the easier the transition will be. Find out more about how self assessment is changing and learn everything you need to know about Making Tax Digital for Income Tax Self Assessment on our resource hub.

If you’re looking for an MTD for ITSA software provider, discover Xero’s MTD for ITSA beta programme and learn how it can help you prepare for the 2024 deadline.

Join Xero’s MTD for ITSA beta programme

Xero’s MTD for ITSA beta programme is one of the first HMRC-recognised software solutions available for Making Tax Digital for Income Tax.