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From the next accounting period starting after 6 April 2024, self-employed businesses, partnerships and landlords with annual gross business or property income above £10,000 will need to follow the rules for Making Tax Digital (MTD) for Income Tax. If your business falls under one of these categories, you might have some questions about what MTD is, how it will work, and how it might affect your business. We’re here to answer your questions.
What is Making Tax Digital?
MTD is a government initiative aimed at modernising HMRC’s tax system. The intention is to make the whole process of administrating tax simpler and more efficient. Once implemented, MTD will ensure that businesses store all their tax information in one place (called a digital account) and your taxes will be calculated based on your business activity during the year. This means that you’ll be able to upload and update your tax account in real time.
Will MTD affect my business?
MTD will likely affect you if you own a business or are self-employed and pay income tax, national insurance, VAT or corporation tax. This means you could be required to keep track of your tax affairs digitally using MTD-compatible software, and update HMRC at least quarterly via your digital tax account. Eventually, this will abolish the annual tax return. This will be the law and there will be penalties for non-compliance.
MTD laws for Income Tax should come into force on 6 April 2024. It will apply to the self-employed, partnerships and those who receive income from property, with gross income from these sources combined above a threshold of £10,000.
The government is running a pilot scheme where businesses can use the online service for Making Tax Digital for Income Tax. See: Sign up as an individual for Making Tax Digital for Income Tax – GOV.UK (www.gov.uk)
What should I do about MTD?
If MTD for Income Tax applies to you and you’re unsure of how to prepare, we’d love to help – the good news is that this isn’t just about compliance. Going digital with your tax can help reduce your running costs and streamline your accounting!
In the last two years, we’ve helped many clients to streamline and digitise their accounting to comply with MTD and take their business to the next level.
Digital accounting solutions have many use cases. Here’s one example. Suppose you had a system where your bank feeds your data directly into your accounts on a daily basis. When you make a business purchase, you can take a photo using your smartphone – the expense will immediately be processed and added to your accounts. You can see your results, who owes you money, who you owe money and your business bank balance anywhere, any time, right from your smartphone.
What we offer
At EOACC have MTD-compliant cloud accounting packages that give you:
- A clear picture of your current financial position in real-time.
- Your accounts stored 100% online, so there’s no software to install and everything is backed up automatically. Updates are free and instantly available.
Please contact us about helping you to comply with the new rules. We are cloud accounting specialists and can train and support you with the right software.