Currently, the making tax digital (MTD) rules only apply to businesses that submit VAT returns. These traders must keep VAT records in a digital format and then transmit this return data directly from their digital records to HMRC using MTD-compatible software.
However, from the 6th of April 2024, similar rules will be implemented for most individual traders and landlords. They will need to begin keeping digital business records and, every quarter, send summaries of their business income and expenses to HMRC.
Who Will The Changes Apply To?
For those with gross trading and/or property income over £10,000 in the current tax year (2022-23), a quarterly MTD will need to be submitted. This will be accompanied by an annual end-of-period statement and an annual finalisation statement, which will replace the tax return. These reports must be submitted to HMRC online using MTD-compatible software, not on paper.
In early 2024, HMRC will inform businesses on whether they need to comply with MTD for income tax; however, we always recommend being prepared and beginning to transition your business now.
How Do You Keep Your Business Records?
Suppose you are currently recording your information in accounting software or on a spreadsheet. In that case, you will be pleased to know that you are already halfway there in meeting the digital records requirements. The next stage will be to choose the MTD-compatible software you will use to submit your reports.
Currently, there is a limited range of suitable software on the market; however, many providers are working on enhancing their accounting packages or developing a bridging software to link existing spreadsheets to HMRC software. This will help to cope with the income tax aspect of MTD.
To prepare your business for MTD for income tax, why not give us a call and book an appointment to begin discussing options?