If you are self-employed or a landlord with gross income over £10k, then the way you report your results to HMRC is signifcantly changing from April 23.
This seems ages away but it is something that you need to be aware of, and need to plan for.
Making Tax Digital for Income Tax will apply from 6 April 2023 and under this, the self-assessment tax return will be replaced by 5 (yes 5!) new reports a year. You will need to submit quarterly updates of your income to HMRC and then a final year end declaration.
Your first return is due in the 4th month of your accounting period and then every 3 months after that.
So if you have a 5 April year end you will have to file the following:
Return to 5 July 23 – due in Aug 23
Return to 5 Oct 23 – due in Nov 23
Return to 5 Jan 24– due Feb 24
Return to 5 April 24– due May 24
Final year end return, including any year-end adjustments to 5 April 24– due 31 Jan 25
And don’t forget – your tax return under the old system for 22/23 will also be due by 31 Jan 24!
To submit the information you will either need to use MTD compliant accounting software, or have a decent spreadsheet set up that you can link to bridging software to enable you to submit.
Initially your tax is still only due to be paid in one go, in January, as now – though the logical next step is for tax payments to be made throughout the year based on the information being supplied!
The one bit of good news is that there won’t be any late filing penalties for the first year – while we all get used to the new system!!
So without totally panicking – what can you do now?
- Work out if this will apply to you. Do you have gross income (not profit) from your self employment, or rental income of over £10K. If you have both, you need to look at the combined total ( eg self employment income of £6k and rental income of £6k – total £12k) to see if you are caught.
- Review your accounting system and consider making any required changes from the start of the next tax year (6 April 22.) This will give you a year to work out how to use it properly and be confident in your bookkeeping before all the changes come in the year after.
- If you are using a spreadsheet, give serious consideration to using an online accounting package. All of the main suppliers have basic packages and will be working hard to ensure they are MTD compliant by April 23.
- Don’t panic! The changes are still some way off, and there is time to plan. At least having an awareness of what lies ahead means you can plan effectively for the changes and ensure your business is ready to meet the challenge.
There will be lots more information coming out about MTD in the next year, and there is still lots to be confirmed about the new regime. We will keep you updated with information as it becomes available.