Making Tax Digital – Extension
The extent of Making Tax Digital is being increased by the government. The requirement to provide records in the new format is being extended to include over 4 million taxpayers who have business or property income in excess of £10,000 per year. This will also include landlords, sole traders and partnerships involving individuals only. Corporate Partnerships will not be affected until a later date.
The initial plan was to introduce Making Tax Digital requirements commencing 6 April 2023 but this had been put back for one year in the light of the ongoing effects of the pandemic. The vast majority of self-employed sole traders with a business income over the £10,000 threshold will need to use compatible software for tax accounting for their first full accounting period starting on or after 6 April 2024.
Making Tax Digital is part of a phased move towards a digital tax service which is deemed to be more fitting for the 21st century. The aim is to support businesses of all sizes and types as they digitise their record keeping in keeping with the shifts and developments in technology. The aim is to build a modern tax administration system that will be more effective and will help boost productivity and better support for taxpayers.
This extension of the Making Tax Digital requirements is set to build on the earlier stages where VAT registered businesses above the VAT threshold in 2019, and for VAT registered businesses below the threshold in 2022.
To comply with the Making Tax Digital requirements all qualifying businesses must keep digital records and they must use third-party software to submit tax returns to HM Revenue and Customs. Those affected by the extension to Making Tax Digital for Income Tax Self-Assessment due in 2024 will need to keep digital records of both income and expenditure, and will be required to send a quarterly summary of income and expenses as well as an end of year report using software or applications that are Making Tax Digital compatible.
In addition the software used by such businesses must be making Tax Digital enable nd must also be capable of receiving digital information from HMRC via their API platform
These changes, whilst not deemed to be onerous by the government, will require changes for many small business owners who may not be familiar with digital accounting systems. If you have any queries or would like to know about the requirements please take advantage of our free consultation where we will be happy to assist you in the best way forward. You can book a free consultation by clicking here.