Making Tax Digital for Income Tax Self Assessment: it’s not too early to start planning!

Accounting Technician Jessica Maddamshighlights some important changes coming up for sole traders and landlords.

If you are a sole trader or a landlord with annual business income over £10,000, then now would be a great time to start to get ready for April 2024, when quarterly Making Tax Digital (MTD) submissions will become compulsory.

All VAT-registered businesses will already be compliant with MTD (as of April 2022), so you may already keeping digital records. However, you will be required to submit a separate, quarterly MTD for Income Tax Self Assessment as well as the VAT return.

If you are not VAT registered, then this may all be new to you and seem a bit daunting. So let us go over the basics of what will be required:

• Sole traders and landlords with income over £10,000 will be required to comply with the new rules from April 2024; partnerships will be required to comply from April 2025.
• Under new MTD rules, businesses must keep digital records and use third-party software to submit their tax returns to HM Revenue and Customs (HMRC). They will need to keep records of their income and expenditure digitally and send a quarterly summary of income and expenses, plus an end-of-year report, using MTDcompatible software.
• The software chosen must be MTD enabled and be capable of receiving information from HMRC digitally.

If you are currently keeping manual records, it may sound like too big a change in the way you do things, but the reality is that many of our clients who have already changed to digital records are finding it much less stressful and time consuming. Once you get started, it will become second nature. This is why moving to digital software now is to your advantage, because by the time it becomes a requirement, you will already be proficient and ready to start submitting those quarterly returns to HMRC.

Each quarterly return will have a deadline for submission which falls on the 5^th of the month after the month following the quarter end. For example, the submission for the quarter ending 30^th June will have a deadline of 5^th August. This short amount of time does mean that you will need to keep up to date on your bookkeeping to ensure you submit in a timely manner.

There are plenty of options for software to choose, from very simple apps which will just record income and expenditure, to software that can deal with a business that has multiple bank accounts and income streams with numerous transactions being processed. The only requirement is that the software you choose is compatible with MTD.

If you are unsure which software to choose, or need further advice about how to prepare, then the staff here at Page Kirk would be happy to assist. Or you may feel like it's just too much and choose to outsource the work to someone else. We can help with that too. Call 0115 9555500 or email enquiries@pagekirk.co.uk.