Tax, made digital. Many of you might know that tax is already digital now as the returns are done online. What this means is your records must be kept digitally.

Making Tax Digital comes into force for sole traders and partnerships from 6 April 2023 with income from all sources above £10,000. This means if you are an employee earning £16,000 per year and/or have a self employed business generating sales of £3,000, you would be required to report with MTD but not the salary as it is reported elsewhere.

The £10,000 limit is based on the income for the tax period 2 years to the tax year you would be reporting in. For example, MTD comes into force from 6th April 2023 so the income in the tax year starting 6 April 2021 is the deciding year – that is this year!


The BIG Changes.

We made sure our clients were ready for this and have already processed their accounting information on a digital platform. Don’t worry if you haven’t transitioned over yet, HMRC will accept records on a simple spreadsheet with software that communicates with them.

Our opinion is to use specific software. This may seem daunting, but a good accountant will help make it as pain free as possible. Most of the tasks you might procrastinate over can be automated and sending customers instant invoices will help you get paid quicker.

You must submit information to HMRC at least quarterly, but you can do it more frequently if you wish. You also have to submit an end of period statement and a statement of intent. This means there is a minimum of 6 returns per year required.

Right now, you submit a tax return (SA100) for all your personal income from multiple sources. Going forward with MTD, you must submit returns for each trade.

For example, if you are a partner in a business, have some small self-employed income from another source, have 2 rental properties one is residential and another is a holiday let you would be looking at 5 quarterly returns (total of 20), 5 end of period statements and one statement of intent. This is a total of 26 returns submitted to HMRC!

MTD is reported using your national insurance number, not your UTR.


Other points

You will not be required to pay taxes when you report. This will be optional. The current payment dates of July and January will still apply.

There will be a soft-landing period where HMRC will be a little more lenient if returns are late.

There will be a point system based on the number of late returns (and possibly the frequency) which will then dictate the penalties they will charge.

New businesses will not be required to start with MTD immediately, you will still receive the 2 year delay to assess the income levels.

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If you want to use specific software, get in touch so we can understand your needs and advise on the best one for you.