MAKING TAX DIGITAL INCOME TAX SELF ASSESSMENT
GET READY FOR THE CHANGES
Julie Hopkins of Ownacarehome.com looks at the tax changes ahead for sole traders and landlords as we get closer to 6 April 2024.
Making Tax Digital goes hand in hand with ‘real time’ reporting of transactions with HMRC’S aim to reduce the occurrence of errors and inaccuracies in reporting to widen the tax net.
MAKING TAX DIGITAL FOR INCOME TAX SELF ASSESSMENT (MTD ITSA)
Sitting alongside the digitalisation of health and social care is ‘Making Tax Digital.’ The plan is that society increasingly reports in real time which will reduce the tax gap on potential errors and inaccuracies with businesses able to function and plan more effectively.
MTD for ITSA is applicable from 6 April 2024 for:
- Sole trader businesses whose annual turnover exceeds £10,000
- Landlords with gross rental income exceeding £10,000
- A combination of both which together exceed £10,000
- The above to be based upon turnover and income reported in the 2022/23 tax return, with new businesses dealt with separately
- Once activated the reporting system will be quarterly until the business ceases or the turnover and income test falls below £10,000 for 3 successive years
General Partnerships with 20 or fewer partners, Limited Liability Partnerships and Companies will join the Making Tax Digital progression from April 2025 and April 2026
How will the business reporting process to HMRC change?
- A quarterly digitally prepared report of all income and expenditure transactions will be submitted to HMRC
- Within one month of quarter end
- Businesses will be sent an ‘estimated’ tax calculation
- There will be an ‘end of year statement’ for each sole trade and/or rental business to include any annual adjustment
- Followed by a ‘year end finalisation’ reporting any other income or gains and other claims
- With the filing deadline remaining as 31 January following the year end
- This will replace the filing of the usual self assessment tax return