Introduction
Self employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2023.
What is “Making Tax Digital”?
Making Tax Digital (MTD) is a government initiative to modernise HMRC’s tax system, with the aim of making the whole process of administrating tax simpler and more efficient. All of your tax information will be in one place (your digital account) and you will be able to pay tax based on your business activity during the year. You can upload and update your tax account in real time.
Will it affect me?
If you own a business, you are self employed and you pay income tax, National Insurance, VAT or corporation tax, then it is quite likely you will be affected. This means you could be required to keep track of your tax affairs digitally using MTD compatible software, and to update HMRC at least quarterly via your digital tax account.
Eventually this will abolish the annual tax return. This will be the law and there will be penalties for non-compliance.
When is all this happening?
MTD for income tax should become law from 6 April 2023. MTD for income tax will apply to the self employed, partnerships and to those who receive income from property, with gross income from these sources combined above a threshold of £10,000.
The Government is running a pilot scheme where businesses can use the online service for Making Tax Digital for Income Tax.
See: https://www.gov.uk/guidance/sign-up-your-business-for-making-tax-digital-for-income-tax
What should I do about MTD?
Talk to us – the good news is that you can reduce your running costs and streamline your accounting by complying with the new rules.
In the last two years we have worked with many other clients to help them comply with MTD and streamline the way they do things.
Just suppose you had a system where your bank feeds your data directly into your accounts on a DAILY basis, you take a photo on your phone of a purchase invoice and it is posted automatically, you can see your results, who owes you money, who you owe and your business bank balance 24/7, 365 from your smart phone.
We have MTD compliant cloud accounting packages that give you:
• a clear picture of your current financial position, in real time;
• automatic updates that mean you can spend more time doing what you enjoy;
• your accounts are 100% online, so there’s no software to install and everything is backed up automatically – updates are free and instantly available.
Please contact us about helping you to comply with the new rules. We are cloud accounting specialists, and we can train and support you with the right software.
Get in touch with the team on 0161 761 5231 or email theteam@horsfield-smith.co.uk.
