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.
Making Tax Digital Support
At Digital Tax Matters, we can help you comply with the MTD regulations. We offer assistance in selecting and implementing digital accounting systems, provide training and ongoing support, conduct compliance checks, and ensure accurate quarterly reporting. Many of our clients choose to outsource their digital bookkeeping to us.
You’ll need to take three steps to prepare for the changes which come into force on the 1st of April 2026:
- Ensure you have set up and have access to your own gateway:
If you haven’t already, then you will be required to create a personal gateway as soon as possible; not only is this necessary for MTD, but it is also a useful tool to keep on top of your personal tax affairs. Your gateway will link to our agent services account and create a digital handshake, which will allow us to file the quarterly returns on your behalf. You can this link to create your personal gateway. - Use software to allow a seamless exchange of information with us:
We have conducted research across a number of software providers, and we advise the best and most efficient software to help you Comply is ‘Xero Simple’‘. This software is packed with features to assist you in complying with the upcoming changes, including a live bank feed and digital receipt-capturing app. The cost for this software is £7 per month. - Set up a separate business account for business use only (includes rental income and sole traders):
If you are currently using your personal account for business transactions, we advise you to set up a separate account for business use only. This will ensure the transactions being pulled through with the live feed capture business transactions only. This will help keep your accountancy fees as low as possible and allow us to report the quarterly figures as efficiently as possible.
Please contact us and discuss this in further detail with your account manager. You can get in touch with us as a new client or for general enquiries via 01234 357595 or office@digitaltaxmatters.co.uk.