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.
Global Mobility – What are the tax implications
Hybrid working, working from home or even working from a location outside the UK – these working arrangements are more common now than ever before for employees of businesses based in the UK.
Companies House reforms – increase to filing charges
Companies House have been given new powers to make the UK a more transparent place for businesses to operate. With these powers, Companies House plan to make changes in several areas.
How do I pay less Tax?
This could be one of the most frequently asked questions that accountants receive, from individuals and business owners. The answer really lies understanding how to minimise your tax liabilities.
Spring Budget 2024 – Impact on the Agricultural Sector
The Spring budget did contain a few announcements which will impact the agricultural sector and consideration should be given to whether action is taken now.
Spring Budget Summary 2024
Following the 2024 Budget, three key announcements that will be important to any tax payers falling in the following groups:
Anyone who lets a holiday cottage
Property developers/investors and
Non UK Domiciled individuals
Multiple Dwellings Relief – Spring Budget Update 2024
This stamp duty land tax relief is to be abolished with effect for transactions with an effective date on or after 1 June 2024. Transitional rules mean that MDR can still be claimed for contracts which are exchanged on or before 6 March 2024, regardless of when completion takes place
Abolition of the Furnished Holiday Let rules – Spring Budget Update 2024
For anyone who owns one or more Furnished Holiday Lets (FHLs), either directly or through a limited company this is a significant change. Until April 2025, if an individual owned and let out a furnished holiday let, broadly a holiday home let out to different individuals for short periods, there were a number of tax advantages that in many respect treated this activity as a trade rather than as an investment:
Changes to Non Domicile Rules – Spring Budget Update 2024
The new rules that apply from April 2025 are proposed to operate for income tax purposes such that if a non UK domiciled individuals comes to live in the UK after a period of 10 years consecutive non-residence, there will be full tax relief for a 4-year period of subsequent UK tax residence on FIGs arising during this 4-year period, during which time this money will remain outside the UK tax net and can be brought to the UK without an additional tax charge.
Right shares, right time?
For start up businesses, it is important to think very carefully about who initial “founder” shares are issued to and consider future “what if” scenarios and how they might be dealt with.
Succcession – How planning ahead is the best option
The succession of the farm is often on the minds of those of whose farm has been in the family for many generations. Not only is it a wish that they would like the farm to continue within the family but also to provide an inheritance to any of their non farming children.
