The way the government requires sole traders and landlords (those with annual sales or rent of over £10,000) record income and expenses and submit details to HMRC is about to change from 6 April 2024. We know this can feel daunting, so we have put together this helpful guide to explain everything you need to know about MTD for Income Tax.
What is Making Tax Digital for Income Tax?
MTD is a UK government-led initiative, designed to bring tax into the digital age, make tax administration simpler for taxpayers and provide them with more information in a timely fashion. HMRC started with Making Tax Digital for VAT in 2019 and they are now moving on to Income Tax.
MTD for Income Tax Self Assessment (known as MTD ITSA or MTD for ITSA) marks the end of the annual self assessment tax return as we currently know it, and in its simplest form, is a new way of reporting your earnings to HMRC on a more regular basis.
Practically though, it means a lot more work for sole traders—as you’ll now need to submit details of your income and expenses to HMRC four times a year, instead of one, plus an end of period statement and a final declaration (similar to the old self-assessment tax return).
Does Making Tax Digital apply to self-employed people?
Yes. Making Tax Digital for Income Tax applies to sole traders, which means that anyone who’s self-employed but doesn’t operate through a limited company will have to sign up and use the new system.
Partnerships will follow a year later.
Do I have to use Making Tax Digital for Income Tax?
If you’re a sole trader*, partnership, or make income from property, and your income is over £10,000 per year before tax, then yes, you’ll have to sign up for MTD for Income Tax when it’s rolled out in 2024. (2025 for partnerships). *i.e. a self-employed person, a freelancer, a tradesperson, anyone who sells a service or makes a product, who runs a business but doesn’t have a limited company.
What is the deadline for Making Tax Digital?
Making Tax Digital for Income Tax Self-Assessment will come into effect for all sole traders (and landlords) earning over £10,000 per year on 6th April 2024.
Has Making Tax Digital been delayed?
Yes: Making Tax Digital for Income Tax was originally set to come into effect in April 2023. But in September 2021, the government announced that, in light of the pandemic, the rollout for sole traders would be delayed by 12 months to April 2024. That means self-employed people now have a little extra time to get prepped.
How will digital tax work?
Making Tax Digital is supposed to simplify tax for self-employed people—but at first glance, it does look like there will be more admin involved than just one annual Self-Assessment tax return, which is your only obligation under the current system.
Keep your eyes peeled for our next update, where we will outline what Making Tax Digital for Income Tax Self Assessment will entail for taxpayers.
Are you a Rural Business thinking of diversifying into Solar Generation and Battery Storage?
With the ever-increasing push for green credentials, the UK renewable energy market is expanding, and many farmers are now facing the opportunity of diversifying or letting land for solar or battery storage.
bennettbrooks team attend the BESS annual scientific meeting
We have extensive experience supporting clients working within the NHS and private healthcare sectors including,
GP Partners
GP Locums
NHS Consultants
Medical Societies
Private Practices and Groups
Allied Healthcare professionals
Dentists
Care homes
Is Tax payable on compensation following pension transfer advice?
There is no general guidance for the taxation of compensation for mis-selling and the tax treatment of compensation payments is a complex area which has given rise to a substantial number of tax cases.
A recent change to Trust and Estates Tax
A welcome change was announced in the March budget that you may have missed. Trusts and Estates with income less than £500 will no longer have to pay income tax.
National Insurance: A reminder to check your record
National Insurance: An important reminder to check your record
If you are a Director/Shareholder of a Company taking salary and dividends there are some tax changes coming in April that you need to consider
If you are a Director/Shareholder of a company there are some important tax changes taking place this 5 April that you should be aware of when considering dividends v salary planning.
SEIS Investments – Changes announced in the recent Spring Budget could affect investors
Our Tax Director, Mary Tierney updates on how changes announced in the Autumn and confirmed in the Spring Budget could affect SEIS investors.
Corporation Tax: A reminder about the Annual Investment Allowance and the Structures and Buildings Allowance
Following the mini-Budget 2022, the Annual Investment Allowance (AIA) will remain at £1 million for the foreseeable future. It is always useful to review your capital expenditure prior to your company’s year end to see if there is benefit in accelerating the commitment to any expenditure.
Corporation Tax: How to benefit from Investment Zones
The mini-Budget 2022 announced the government will be working with 38 areas across the country to introduce Investment Zones. Similar zones may be introduced in Scotland, Wales and Northern Ireland but this is yet to be confirmed.
Corporate Tax: Super deduction coming to an end on 31 March 2023
From 1 April 2021 to 31 March 2023, a super deduction at 130% is available on most new plant and machinery expenditure that would ordinarily qualify for writing down allowances at the main rate of 18%.
