Government Announces phased mandation of Making Tax Digital for ITSA

Self-employed individuals and landlords will have more time to prepare for Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA), following a government announcement today (19 December 2022).

Understanding that self-employed individuals and landlords are currently facing a challenging economic environment, and the transition to Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) represents a significant change to taxpayers and HMRC for how self-employment and property income is reported, the government is giving a longer period to prepare for MTD. The mandatory use of software is therefore being phased in from April 2026, rather than April 2024.
From April 2026, self-employed individuals and landlords with an income of more than £50,000 will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software. Those with an income of between £30,000 and £50,000 will need to do this from April 2027. Most customers will be able to join voluntarily beforehand meaning they can eliminate common errors and save time managing their tax affairs.
The government has also announced a review into the needs of smaller businesses, and particularly those under the £30,000 income threshold. The review will consider how MTD for ITSA can be shaped to meet the needs of these smaller businesses and the best way for them to fulfil their Income Tax obligations. It will also inform the approach for any further roll out of MTD for ITSA after April 2027.
Mandation of MTD for ITSA will not be extended to general partnerships in 2025 as previously announced. The government remains committed to introducing MTD for ITSA to partnerships in line with its vision set out in the government’s tax administration strategy.
Victoria Atkins, Financial Secretary to the Treasury, said:
It is right to take the time to work together to maximise the benefits of Making Tax Digital for small businesses by implementing the change gradually. It is important to ensure this works for everyone: taxpayers, tax agents, software developers, as well as HMRC.
Smaller businesses in particular should be able to experience the benefits of increased digitalisation of Income Tax in a way which meets their needs. That is why we are also today announcing a review to establish the best way to achieve this.
Jim Harra, Chief Executive and First Permanent Secretary, HM Revenue and Customs, said:
HMRC remains committed to the delivery of Making Tax Digital as a critical part of our strategy for digitalising and modernising the tax system, but we want to make sure we get this right and deliver it effectively.
A phased approach to mandating MTD for Income Tax will allow us to work together with our partners to make sure that our self-employed and landlord customers can make the most of the opportunities this will bring.
The announcement relates to MTD for ITSA only. Making Tax Digital for VAT has already been implemented and is demonstrating the benefits to businesses and the tax system of digital ways of working.
Further information
A copy of the Written Ministerial Statement made by Victoria Atkins, Financial Secretary to the Treasury, on 19 December 2022 is available on UK Parliament: Written questions, answers and statements.
Under MTD for ITSA, businesses, self-employed individuals and landlords will keep digital records, and send a quarterly summary of their business income and expenses to HMRC using MTD-compatible software. In response they will receive an estimated tax calculation based on the information provided to help them budget for their tax. At the end of the year, they can add any non-business information and finalise their tax affairs using MTD-compatible software. This will replace the need for a Self Assessment tax return.
GOV.UK guidance on Making Tax Digital for Income Tax will be updated shortly.
Before today’s announcement, MTD for ITSA was mandated from April 2024 for customers with a total gross income over £10,000 from self-employment and property in a tax year, with partnerships mandated from 2025.

(This article is taken from Gov.uk for your information)

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How can my business survive a recession?

The UK seems to be officially heading for a recession and in this blog we will be discussing how you can prepare your business for the coming months.

Before we evaluate the steps you can take to protect your business in a recession, it’s important to highlight that a recession is part of a normal economic cycle, and there will be easier and better times ahead.

A recession can in fact, focus your attention on cost control and have a long-term positive impact on your financial processes and disciplines. (We like to focus on the positives where we can!) So let’s take the perspective of a challenge that we are ready to complete with the following tips and advice from our expert panel of accountants.

 

1: Cash flow is King. Cash flow is the number one priority in surviving a downturn in the economy and this requires stringent financial management. Remember, if you don’t often speak with your accountant, now is the time to take a look at the business accounts together.

2: Manage your debt. Companies with higher debt are more vulnerable in a recession as your outgoing commitments are higher. Can you consolidate your debt into one payment? It may require a longer term at a higher interest rate but could that be less impactful on your business and retain more cash In the business? Whatever you do don’t bury your head in the sand – more that likely something can be arranged to help manage this better.

3: Credit control needs to be tighter than ever. It is likely that your customers are facing the same financial issues, therefore it’s more important than ever to get a tight control on credit. This is something your accountant can help you with if you prefer to outsource invoicing so as to keep your professional relationships stress-free.

4: Overheads. Can you cut back on any overheads? If sales are down, can you cut back on staff or staff hours? Business owners are often reluctant to do this, but it could be essential to your business surviving or not.

Maybe now is the time to invest in automation and IT systems for your business to ensure a smoother running and less staffing overheads.

Can you outsource more jobs so you don’t have to employ an in house staff member? For example HR, Payroll or bookkeeping?  This can be higher in cost yet more cost effective as they will be experts, likely more efficient and you won’t need to absorb employer obligations such as holiday and sickness pay.

Are you on the best deals for your utility bills? Take some time to look at all of your expenses and ensure that you aren’t overpaying in places.

Do you still need that big premises? Can you move to remote working? Can you make better use of space and downsize?

 

5: Re assess your marketing strategies. A recession is not the time to cut back on your marketing spend. In fact, your voice needs to be louder than ever and your customers need to know why they need to choose you over your competitors when they are having to tighten their belts.

Take time to assess your marketing strategies and ensure you are really talking effectively to your consumer – focus on them. Offer meaningful deals and promotions, but don’t compromise on quality.

 

6: Prioritise networking events.

Post pandemic networking is on the up – not surprising! And it’s more important than ever to make those all important business connections and lasting business relationships. These connections can likely offer business opportunities, offer collaborative ideas and usually you can gain advice and support from other like minded business owners. Collaboration is key.

 

This list is not exhaustive and as always, please do give Soldi Partners a call if you’d like a chat. It’s always jargon free – and its always no obligation.

www.soldipartners.co.uk 

Theresa x

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5 Ways to Get Support for your SME

Five ways you can get financial support for your business

1: Claim up to £5,000 with employment allowance

Employment allowance is a tax relief which allows eligible businesses to reduce their national insurance contributions bills each year. You can claim this is if you are a business, and your employer Class 1 national insurance liabilities were less than £100,000 in the previous tax year.

That’s a new tax cut that’s worth up to £1,000 for nearly half a million SMEs!

2:Get a discount of up to £5,000 on software, with Help to Grow: Digital

Help to Grow: Digital is a UK wide Government backed scheme that aims to help businesses choose, buy and adopt digital technologies that will help to grow their business.

Eligible businesses can receive a 50% discount on buying new software worth up to £5,000 per SME, alongside free, impartial advice and guidance about what digital technology is best suited to boost their business performance.

3: Get up to half off your business rates 

From April this year, small retail, hospitality and leisure businesses can benefit from 50% off their business rates bills. The business rates multiplier has also been frozen.

4: Invest in your business with Super-deduction and Annual Investment Allowance

To spur business investment, the super-deduction allows companies to cut their tax bill by 25 pence per every £1 they invest in any qualifying machinery and equipment. This can include the purchase of computers, most commercial vehicles and office furniture. This allows businesses to spend up to £1 million on qualifying business equipment , and deduct in-year its full cost before they calculate their taxable profits.

5: Benefit from the cut in fuel duty

The government has cut fuel duty on petrol and diesel by 5 pence per litre for 12 months – effective from 23 March 2022.

This cut, plus the freeze in fuel duty in 2022-2023 , represents a £5 billion saving worth around:

  • £200 for the average van driver
  • £1,500 for the average haulier

 

Information on behalf of HMRC – for more information visit Gov.uk or Call us for a no obligation Consultation. 

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