Making Tax Digital (MTD) is a government initiative that aims to make it easier and simpler for businesses to manage their tax affairs.
MTD will be rolled out in stages, with the first stage for VAT registered businesses coming into effect in April 2019.
Under MTD, businesses will need to keep digital records of their income and expenses, and submit their VAT returns online using compatible software such as Xero. This will help HMRC to get a more accurate picture of a business's tax liability, and will make it easier for businesses to file their returns on time.
The government has said that MTD will save businesses time and money, and will make it easier for them to comply with their tax obligations. However, some businesses have raised concerns about the cost of implementing MTD, and the potential for it to create extra work for businesses.
Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA)
MTD for ITSA is the second stage of MTD, and will apply to self-employed individuals and property landlords. MTD for ITSA will come into effect for all self-employed individuals and property landlords with income over £50,000 from April 2026. Those with an income of between £30,000 and £50,000 will need to do this from April 2027. You can also elect to join voluntarily beforehand.
Under MTD for ITSA, self-employed individuals and property landlords will need to keep digital records of their income and expenses, and submit their Self Assessment returns online using compatible software. This will help HMRC to get a more accurate picture of a self-employed individual or property landlord's tax liability, and will make it easier for them to file their returns on time.
Changes to the ‘basis period’ rules
From April 2023, there will also be changes to the ‘basis period’ rules for self-employed individuals that prepare accounts to a date other than 31 March or 5 April. These changes will mean that self-employed individuals will need to use a different basis period for calculating their income tax liability.
The new basis period will be the period from 6 April to 5 April in the following year. This means that self-employed individuals will need to keep records for a longer period of time.
The government has said that these changes are necessary to make the tax system fairer and simpler. However, some self-employed individuals have raised concerns about the potential impact of these changes on their cash flow.
Conclusion
MTD is a significant change to the way that businesses and self-employed individuals manage their tax affairs. It is important to be aware of the changes that are coming, and to start planning how you will comply with MTD.
If you need help with MTD, we can provide you with advice and support. We can help you to choose the right software, and we can provide training on how to use it. We can also help you to prepare for the changes to the basis period rules.
To find out more about our services, email mail@assets.ltd.uk or call us on 0118 946 4700.
Our core services
Our tax services make sure that your tax liability is calculated taking into account all allowed exemptions and deductions. We simplify the process by using accountancy software to accurately complete tax returns and calculate any tax liability that may occur, along with any payments that need to be made.
Corporation tax reliefs and rates change annually, so we ensure that we can provide all the right guidance and advice when looking at exemptions, allowances and deductions that may be available.
We will thoroughly review and prepare corporation tax returns in great detail in order to ensure you are complaint and that you don’t incur any penalties.
You may be looking at investments, a second property or another asset and our team can make sure you maximise your exemptions while simplifying the difficult area of capital gains tax.
We can help with the complex issue of personal tax, we know it can be difficult to understand, which is why we help every step of the way. We take away the time and stress by creating a tax planning strategy that suits your tax affairs, helping ensure you pay the least amount of tax. Our team will advise when payments are due along with what forms need to be filed and returned to keep you compliant.
How we help your business
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