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HMRC have been talking about expanding Making Tax Digital since they implemented the first phase back in 2019

 Along the way there was little thing called a pandemic that got in the way of their grand plans to send it all to the cloud but they are back on track now and as sole trader or small business you’re going to need to know how it affects you

 And your plan to ignore it for as long as possible is probably not a feasible one. Sorry to break it to you!

 

 What is Making Tax Digital?

 HMRCs plan is to move all business owners over to complete their tax returns and keep their records digitally. The ultimate aim is for everything to be paperless

 The rationale behind this is that it makes it easier for individuals and businesses to get their tax right and stay on top of their tax affairs

This builds upon the Personal Tax Accounts which were introduced in 2015 in an attempt to make it easier for people to manage their personal tax affairs

 Making Tax Digital for VAT was introduced in 2019 and required businesses with a turnover of over £85,000 to keep digital records and submit their returns using accounting software. This was extended to include all VAT registered businesses from April 2022

From April 2024 all self-employed businesses and landlords with an annual income over £10,000 will need to follow the rules for Making Tax Digital

 

What does this mean for your VAT registered business?

 If your business is registered for VAT you will need be keeping digital records which includes certain information like your VAT number and details of any schemes used, the value of sales made and total output tax, rates of VAT charged etc. You can find a full HMRC guide here

 

What does this mean for you as a Sole Trader (Self-employed) or Small Business (not Limited)?

 From April 2024 HMRC will be launching Making Tax Digital for Income Tax. HMRC say that it is a more ‘real time’ system and will help you to see how much income tax you owe as you go rather than it being a nasty surprise each January!

The system requires you to submit digital quarterly updates to HMRC and then at the end of the financial year you’ll send a final report and your tax for the year will be calculated after accounting for any allowances and relief.

 You can sign up now voluntarily by following this link. This might help you get used to the new system before it becomes compulsory.

 You can find a full step by step guide to Making Tax Digital for Income Tax here

 

Making Tax Digital Software

All businesses will need to use accounting software to send their returns and whilst your digital records don’t all need to be on one piece of software the product you use will need to be compatible with HMRC systems

 You can find a full list of compatible software here

Businesses that don’t already use accounting software are likely to face some initial and ongoing costs as they train staff and put new processes in place

Need help going digital? Book a call here and let’s have a chat about how I can help

 

 

 

Call:

07957 102486

Email:

kate@mariposaservices.com

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