When will MTD affect me?
Since April 2019, Making Tax Digital (MTD) has been introduced for the majority of VAT-registered businesses with a taxable turnover above £85,000. From April 2022, this has been extended to all VAT-registered businesses in the UK.
What do I need to do?
The main change required for MTD Income Tax is that your annual self-assessment tax return which has always been submitted by 31 January, will be replaced by more frequent reporting for businesses and landlords who have a turnover or rental income above £10,000 per year.
On top of that you will need to file an annual reconciliation, effectively a final account for the four quarters. The annual reconciliation needs to be submitted alongside a final declaration at end of your accounting period, by 31 January following the end of the tax year.
To be compliant with the Making Tax Digital for VAT, businesses have to keep digital records and it must be done by using compatible software approved by HMRC.
- Keep records digitally – what you need to keep hasn’t changed, but it needs to be kept on HMRC approved software, so no more spreadsheets.
- Submit quarterly updates – you will need to update HMRC every three months.
- Submit an End of Period Statement – at the end of the accounting period you will need to finalise how much profit you have made and how much tax you owe. Your accountant can also make any adjustments for allowances or reliefs that you are entitled to. This is due by 31 January.
- Final declaration – you need to make a single final declaration no later than the 31 January following the end of the tax year. This will bring together all the information in your individual submissions.
- Pay your tax – this is still due by 31 January each year. The requirement to provide a payment on account has also not changed.
How can we help?
If you are a sole trader or landlord earning over £10,000 per year, your local AIMS Accountant will be able to help by using the compliant software to submit all the required reports from your business directly to the government. Before April 2024, your business should be accustomed to the new digital way of doing your tax submissions, but we will still need all your paperwork in digital format to complete the process on your behalf.
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