MTD for Income Tax - will it affect your business?

Making Tax Digital is well underway, and businesses now need to consider the implications of the next stage, Making Tax Digital for Income Tax. This will apply to all self-employed businesses and landlords with annual business or property income above £10,000 from their next accounting period starting on or after 6 April 2023. This date may seem like a long way off, but we strongly recommend that you start to think how MTD will affect your business – it will soon be here!

What is ‘Making Tax Digital’?

Making Tax Digital (MTD) is the government’s initiative to modernise the HMRC tax system, with the aim of making the whole process of administrating tax simpler and more efficient. All your tax information will be in one place (your digital account), and you will be able to pay tax based on your business activity during the year. You will be able to upload and update your tax account in real time.

Will it affect me?

If you own a business, you are self-employed and you pay income tax, national insurance, VAT, or corporation tax, then it is quite likely you will be affected. This means you could be required to keep track of your tax affairs digitally using MTD compatible software, and to update HMRC at least quarterly via your digital tax account. Eventually this will abolish the annual tax return. This will be the law and there will be penalties for non-compliance.  

When is all this happening?

MTD for income tax should become law from 6 April 2023. MTD for income tax will apply to the self-employed, partnerships and to those who receive income from property, with gross income from these sources combined above a threshold of £10,000.

What are the benefits to me?

Whatever size your business is, transferring your accounting to a digital package will deliver several benefits, including: 

• A clear picture of your current financial position, in real-time - your bank feeds your data directly into your accounts on a daily basis
• Automatic updates - you can see your results, who owes you money, who you owe and your business bank balance 24/7, 365 from your smart phone.

Your accounts are 100% online, so there’s no software to install and everything is backed up automatically. Updates are free and instantly available.

The next step

Drop us a line with any questions you may have about Making Tax Digital: enquiries@torgersens.com.

About the Author

Martin Johnson

Partner

With expertise in advising family-owned companies on a range of tax, accountancy and business issues, Martin also has an in-depth knowledge of the automotive and property sectors. In addition, he provides advice on inheritance tax planning and financial management to owner-managed businesses.  Martin leads the firm in developing its expertise in the buy-to-let sector, advising both residential and commercial property owners on relevant tax and legislation issues. A further element to Martin’s role is to build Torgersens’ relationships with banks, financial advisors and specialists in commercial and employment law to ensure that the firm’s clients have access to market-leading guidance.  

To get in touch please e-mail martin.johnson@torgersens.com.