Some of you will already be familiar with Making Tax Digital for VAT, which HMRC phased in from April 2019. This is already compulsory for businesses with turnover exceeding £85,000 but will be mandatory for all VAT registered businesses from next April.
Making tax digital requires tax payers to store their records digitally, and use software to file VAT returns.
From April 2023 Making Tax Digital will also be compulsory for income tax, if you have self-employed income or rental income over £10,000. You can opt in to trial this voluntarily before it becomes compulsory if you wish to do so.
Making Tax Digital will also be coming in for companies from April 2026, so it’s a good idea to start assessing whether accounting software may benefit you, if you are not already using any.
As well as the requirement to keep digital records, Making Tax Digital for Income Tax will involve quarterly reporting of income and expenses to HMRC, which will have to be filed using online software. In addition to the quarterly reporting, you will still need to complete finalised figures each year in order to calculate your tax bill accurately.
The timing of the quarterly returns will be determined by the business year end. For example, if the year end is 5th April, the 4 quarters will be:
- 6 April to 5 July
- 6 July to 5 October
- 6 October to 5 January
- 6 January to 5 April
Keeping digital accounting records can be tailored to your needs. We can help you find the right solution for your business, whether that be using spreadsheets or accounting software.
HMRC will be penalising for late quarterly returns, so now is the time to make sure you are prepared for these big changes and we are happy to help you to do so.
We are here to help and can work with you to find a bespoke solution to ensure this isn’t a burden for you, whether that is complete maintenance of your digital records or training you on how you can take care of it yourself. As always, we want to do what we can to take your stress away and free up your time to concentrate on what you do best, running your business.
Please get in touch for advice and stay one step ahead.