Making Tax Digital (MTD) has been the norm for VAT-registered businesses for a little while now.
In a bid to make the UK one of the most digitally advanced tax administrations in the world, HMRC also wants self-employed business owners and landlords with annual business or property income above £10,000 to follow the same rules.
However, the government has recognised that more time is needed before this significant change comes into effect and, as such, they have delayed the introduction of Making Tax Digital for sole traders, landlords and general partnerships.
What is Making Tax Digital?
Making Tax Digital is a digital tax system that is planned to allow taxpayers to easily keep digital records and report their tax liabilities and payments in real time.
Businesses, sole traders and landlords will use software to keep digital records and send Income Tax updates instead of filing a Self Assessment Tax Return.
When will MTD for Income Tax start?
For sole traders and landlords with income above £10,000, Making Tax Digital for Income Tax will now start in the tax year beginning April 2024, a year later than originally planned.
For general partnerships with income above £10,000, MTD for Income Tax now starts in the tax year beginning April 2025. This was originally set to start at the same time as the general MTD for Income Tax scheme in April 2023.
Other types of more complex partnerships (e.g. limited liability (LLPs), mixed or corporate) will follow at an as-yet-undisclosed time.
Why has the MTD for Income Tax start date been delayed?
MTD for Income Tax has been delayed by the government following the recent pandemic. A later start date provides time for those required to join to make the necessary preparations and afford HMRC additional time for testing the pilot.
It’s worth noting, however, that the MTD for Income Tax pilot programme hasn’t changed, and people can continue to sign up ahead of time provided they fit the criteria and are using compatible software.
Will MTD for Income Tax still go ahead?
MTD for Income Tax is still on the radar of a considerable number of sole traders and landlords. It’s simply been delayed by one year.
That’s not a very long time in the world of business, and the advice is that you should, if you haven’t already, begin digitising your business now.
It’s important to remember that, by requiring the use of software, MTD for Income Tax offers many benefits to your business that can be transformational; you can greatly reduce your admin load while gaining an advantage over your competition.
At James and Uzzell, we pride ourselves on providing an honest and trustworthy service. Our friendly team would be happy to discuss your requirements and help you choose an accounting system that suits you. If you would like to talk to a member of the team, please feel free to give us a call on (01792) 799 100 or send an email to email@example.com.