The next big step in the Government’s Making Tax Digital (MTD) initiative is rapidly approaching.
From the 6 April 2023, the MTD ‘net’ is being cast wider to include businesses and landlords with a combined total gross income exceeding £10,000 per annum, from the following sources:
- UK property, and
- overseas property.
The evolution of the regime will see a whole new demographic of taxpayers have to adapt their practices – if they haven’t already – to keep digital records of all business income and expenses.
They must then use MTD-compatible software to provide HMRC with quarterly updates, followed by a ‘final declaration’. This effectively means that HMRC will receive five tax updates annually, rather than one self-assessment tax return.
The final declaration is expected to include details of all other income and any accounting adjustments and must still be submitted by 31 January.
It is anticipated that quarterly summary information will need to be submitted within one month of the quarter end.
As with most other Government initiatives, there are certain exemptions. Those that apply to the next stage in the MTD roadmap include:
- Trusts, estates, trustees of registered pension schemes and non-resident companies; and,
- Partnerships that have corporate partners and Limited Liability Partnerships (whilst not required to join in April 2023, they will be required to join MTD at a later date).
As with existing MTD for VAT (MTDfV) requirements, taxpayers will need to have HMRC compliant online accounting software in place, to facilitate these regular submissions.
Whilst use of Excel spreadsheets will be acceptable, you must have a suitable bridging software in place to facilitate submission of data to HMRC.
If you are going to be affected by the incoming MTD for Income Tax requirements, there is no time like the present to begin thinking about how you will comply.
A proactive approach to readying yourself for the rules will ensure you are prepared ahead of time, and not rushing to adopt new systems and processes at the eleventh hour.
Caroline Hicks, Portfolio Manager at George Hay, says, “For every taxpayer that has voluntarily taken steps to embrace digital tools within their business, before it is required of them, there is another who will not have given MTD a second thought because they do not fall within scope of the rules just yet.
“Adopting new systems and processes in order to be compliant can be daunting, but less so if you take a proactive approach to doing so and seek the right professional support along the way.”
How can George Hay help?
We have always been upfront with our clients about where Making Tax Digital is headed and encouraged them to consider the benefits of cloud accounting software, besides compliance.
If you have made the switch, then you are undoubtedly at an advantage as the initiative advances. On the other hand, if you haven’t yet made a place for digital tools and software within your business, it could be a good time to begin to explore your options.
If you need support with MTD compliance, or you just want to discuss the benefits of a new way of working, email us at firstname.lastname@example.org. Alternatively, fill in our contact form and one of our advisers from Cambridgeshire, Bedfordshire or Hertfordshire will be in touch.