What are obligations?

Definition of obligations

Obligations is a term sometimes used by HMRC to describe the periods of time for which taxpayers using Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) must provide information around their income and expenses.

MTD for ITSA will come into effect in April 2024 and will replace the annual Self Assessment tax return for many taxpayers.

Each affected taxpayer will have multiple obligations that are based around their accounting period. For example, a sole trader whose accounting year runs from 6th April to 5th April of the following year will have to submit four quarterly updates. In this example, the sole trader’s obligation periods would be:

  • 6th April - 5th July
  • 6th July - 5th October
  • 6th October - 5th January
  • 6th January - 5th April

The sole trader will also be required to submit an end of period statement for their accounting year and to finalise the business’s income in a final declaration which confirms that the updates sent are correct.

Disclaimer: The content included in this glossary is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this glossary. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.

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