Have you considered the preparation involved for making tax digital (MTD) for income tax? MTD aims to make it easier for you to get your tax correct, at both an individual and business level.
The MTD rules currently only apply to businesses that submit VAT returns. Those traders need to keep their VAT records in a digital format and transmit their VAT return data directly from their digital records to HMRC using MTD-compatible software.
From 6 April 2024 similar MTD rules will apply to most individual traders and landlords who will need to keep digital business records and send digital summaries of their business income and expenses to HMRC every quarter.
If your gross trading and/or property income is more than £10,000 in the current tax year (2022-23), you must submit;
- Quarterly MTD updates plus an annual end-of-period statement;
- and an annual finalisation statement that replaces your tax return
As expected, all of the above must be submitted to HMRC online using MTD-compatible software, not on paper.
HMRC will tell you early in 2024 whether you need to comply with MTD for income tax but it is best to start preparing your business now.
How do you keep your business records? If you are recording the information in accounting software or on a spreadsheet you are halfway there with the digital records requirement.
The next stage is to choose some MTD-compatible software to submit the MTD reports. Many software providers are planning enhancements to their accounting packages or developing bridging software to link existing spreadsheets to HMRC software to cope with the income tax aspect of MTD. So watch this space!
Contact us to talk about how you can best prepare your business for MTD for income tax.