Making Tax Digital for Income Tax Self- Assessment is coming!
9th August 2022
Sole Traders and those with property income….Making Tax Digital for Income Tax Self- Assessment is coming!
Making Tax Digital (‘MTD’) is the UK government’s programme designed to help businesses and individuals get their tax right and help HMRC get more accurate forecasts on economy and the funds the government will take.
You may be familiar with Making Tax Digital (‘MTD’) for VAT that came in a few years ago. The same principles are to apply for those under Income Tax Self- Assessment (‘ITSA’), individuals with certain personal income, to digitally record and submit tax data to HMRC.
You might already use HMRC’s online services to complete tasks such as submitting digital tax returns, but MTD for Income Tax will require you to use software for your accounting too.
There is also an important point for any sole traders (and partnerships) with accounts not drawn to 31 March or 5 April below.
General partnerships will not be required to join MTD for ITSA until April 2025.
We are talking to our clients about the impact this will have in the next couple of years. Please feel free to contact one of the tax team to find out more.
|When does this start?||MTD for ITSA is due to start on 6 April 2024|
|Who will be affected?||Sole traders with gross income over £10,000 per annum, or
Individuals who receive gross rental income over £10,000 per annum, including furnished holiday lets, or
Gross income over £10,000 combined from these sources.
This will initially be based on income levels for 2022/23
|What does this mean?||Individuals and businesses caught will be required to keep digital records and submit 4 quarterly returns of income and expenses to HMRC during the tax year, within one month of the end of each quarter.|
|What will be included in the quarterly returns?||The quarterly returns will only include the basic income and expenses.
Accounting adjustments for capital allowances etc. will be made in a separate end of period statement
Businesses with a turnover under the VAT threshold (currently £85,000) will only need to submit two figures in their quarterly returns, those for total income and total expenses
Businesses with a turnover in excess of the VAT threshold will need to submit more detailed information.
For an individual with income from a sole trade and rental income, separate reports are likely to be required for each source.
|Does this mean that I will no longer complete a tax return?
|A final declaration will still need to be made to finalise the tax year which will be similar to the current tax return and include all other relevant income and expenses.|
|What else is changing?||As some sole traders and partnerships do not currently prepare their annual accounts up to the end of the tax year – either to 31 March or 5 April each year – from 6 April 2023 these businesses will be required to
|Does this mean that I will pay my tax on different dates?||HMRC have said that they currently have no plans to change tax payment dates|
|Some matters to consider||Record Keeping
Software to use
How Rowleys can help, and your involvement
Please contact us to find out more.
More information can be found here: https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital