… and what it will mean for Sole Traders and Landlords
The government’s ongoing programme to make the tax system fully digital has been delayed for 12 months. HMRC announced the delay in October in recognition of the impact that the pandemic has had on British businesses.
Making Tax Digital for Income Tax self assessment will now be introduced in the tax year beginning in April 2024.
Making self assessment digital will predominantly affect people who are Sole Traders and Landlords.
What will sole traders and landlords have to do?
From April 2024, individuals currently using self assessment for their income tax will need to use digital methods for their income tax accounting and reporting. This involves:
- Registering for Making Tax Digital for Income Tax by 6 April 2024
- Adopting an accounting software system that is compatible with Marking Tax Digital for Income Tax.
- Providing HMRC with quarterly updates using your software.
- Submitting an End of Period Statement by the end of January and a final declaration of all your income.
- Paying the balance of any tax and National Insurance contributions due.
Does this affect all landlords and sole traders?
Landlords only need to follow the Making Tax Digital rules if the rent they receive is more than £10,000 per year..
It will not affect landlords who set up a limited company for their property business, as these will pay corporation tax. Making Tax Digital for corporation tax will not arrive until at least 2026.
On a similar note, Making Tax Digital will apply to any sole traders whose income is more than £10,000 per year. If you are under the £10,000 threshold you will be able to continue to file your tax return in the normal way.
Are there any exceptions?
There is an option to apply to be ‘digitally excluded’ if it is not practical or possible for you to use a compliant software system. This might be due to disability or a lack of cloud connectivity where your business is based. You will need to evidence your reasons to HMRC.
Is there a way to make this simpler?
If you don’t already have an accountant, now may be a good time to appoint one. We will recommend a suitable accounting system that is compatible with Making Tax Digital.
While you will need to input your income and expenses into the system, your accountant can work out your quarterly updates, End of Period Statement and final declaration. We will also make sure you keep to all the deadlines.
Although there is no rush to move to a cloud based system just yet, the sooner you get used to a new accounting system, the more confident you will feel by the time the new requirements become law.
We’re happy to talk you through Making Tax Digital and what’s involved. We’re accountants for Sole Traders and landlords across the Lune Valley area. We also manage payroll services and corporate accounts. Just get in touch!