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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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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6 Ways to keep your business healthy

2022 is proving to be yet another exhausting year for many – and it’s taking it’s toll on businesses too. Many of us get wrapped up in the day to day running of our businesses, that we neglect key ways to keep ourselves, and our businesses healthy.

 

Here’s our take on some top tips to implement to do just that.

Personal Wellness.

This industry makes millions and it’s a hot topic again in 2022 thanks to a post covid change in the way we live and value wellness. There is an abundance of paid and free information, ideas and guidance ranging from nutrition to exercise and meditation. With the cost-of-living crisis upon us, and business owners working harder than ever to survive, it’s never been a better time to invest in your personal wellness.

Connect.

Never underestimate the value of connection in business. Whether it’s a phone call, personalised email or private chat on social media, use every opportunity to connect with your audience to ensure you are a contactable, personable business.

Never stop learning.

A mistake easy to make is complacency in your skillset. The business world is ever evolving and keeping yourself educated and in the know in your industry is an important part of keeping your business and yourself relevant. Invest in yourself and your staff by regularly updating your education and knowledge to keep your business healthy.

Invest in people.

As the ever so wise and successful businessman Steven Bartlett says, when you are a business owner you are essentially a recruitment company. As a business owner you can’t be everything your business needs. Investing in the right people to do the right jobs within your business is one of the most important things you can do to grow.

 

Laugh more.

This had to be included – there must be a culture of hard work, dedication AND laughter in your business to keep you, your staff, and ultimately your business, healthy.

 

Don’t ignore the numbers.

We wouldn’t be doing our job if we didn’t shine a light on the importance of bookkeeping and analysing the numbers in your business. Don’t ignore them – healthy businesses are ones with accurate figures and action plans for ensuring those numbers are working for you!

I hope you find these tips helpful. Get in touch if you think of other ways to keep your business healthy!

Until next time,

Theresa

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Why should I hire an accountant?

Hiring an accountant to look after your business finances can be a savvy move. DIY finances aren’t for everyone, especially when your accounts start looking rather complicated. Whether you’re just starting out, or if you’re up and running but looking to expand, here are some ideas why you need an accountant helping your business develop.

 

Saves you time

The majority of people start businesses doing what they love, and what they’ve always dreamt of doing. For most people, this unbridled enthusiasm generally doesn’t extend to spending hours on financial records and paying taxes.

Accountants can help you focus your business efforts on the really important (money-making) stuff, whilst they take care of the other important (tax paying) stuff. It’s a win-win; you don’t get to waste time crunching numbers, and you get to spend time making more money.

 

They’re up-to-speed

Tax deadlines, limits, and amounts due have an annoying habit of changing on a semi-regular basis. Overlook one critical change, and you could end up massively underestimating your next tax bill.

Using an accountant guarantees that deadlines are met, and that you’ll be paying the correct proportion of tax at the right time (and to the right people). Understanding how the system works can be a bit of a minefield; an accountant will help you tread carefully.

 

 

 

You could save money

Think hiring an accountant is expensive? Think again. A good accountant will be able to highlight any areas where you could be saving money (such as claiming for all of the expenses you’re entitled to), which means that not only could they drastically cut your tax bill, but they could even end up paying for themselves.

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Business support and advice

It might be that being a sole trader isn’t very financially efficient any more, and that you’d be better off running as a Limited Company of operating through an Umbrella company.

Accountants aren’t there just to help with finances; their support can improve your whole business setup. If you’re just starting out, they can cast a beady eye over your projections and financial plans. As your business grows, they’ll be able to run you through the various options available and point you in the right direction if you decide to change the structure of your business.

 

Full account management

Although you’ll still be legally responsible for their accuracy, you can handover full management of your accounts to your accountant. This means they’ll be able to do everything on your behalf, from completing your tax return, managing PAYE to filing your accounts with Companies House. You could even nominate them to manage your communication with HMRC. No more wasted hours listening to dreary hold music? Yes, please.

 

You might need investment

At some point, most businesses will need investment. Whether it comes in the form of a bank loan, business angels, or investors, you’ll need a solid plan detailing both your forecasts and your accounts to-date.

An accountant will be able to offer guidance and ensure you’ve thought of everything, and provide reassurance to those looking to invest that your figures are accurate and realistic.

 

It makes life easy

Spreadsheets, invoices, and tax returns aren’t for everyone. If the thought of just opening up your accounts gives you a spreadsheet-induced migraine, hiring an accountant would be a good shout – and some may even give you access to software so you get a hands-on picture of your finances.

 

Not only will an accountant keep your accounts in order, but you’ll also have the added assurance that you won’t be penalized for late payments. Plus, you’ll get to spend January feeling smug about having a hassle-free tax return; now, who said you can’t buy happiness?

 

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