Making Tax Digital (MTD) for income tax – Only 18 Months left to comply
Self-employed businesses, partnerships and landlords with annual gross business or property income above £10,000 will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2024.
Making Tax Digital (MTD) is a government initiative to modernise HMRC’s tax system, with the aim of making the whole process of administrating tax simpler and more efficient. All of your tax information will be in one place (your digital account) and you will be able to pay taxes based on your business activity during the year. You can upload and update your tax account in real time.
If you own a business or are self-employed and 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 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.
MTD for Income Tax should become law from 6 April 2024. It will apply to the self-employed, partnerships and those who receive income from property, with gross income from these sources combined above a threshold of £10,000.
The government is running a pilot scheme where businesses can use the online service for Making Tax Digital for Income Tax.
See: Sign up as an individual for Making Tax Digital for Income Tax – GOV.UK (www.gov.uk)
What should I do about MTD?
Talk to us – the good news is that you can reduce your running costs and streamline your accounting by complying with the new rules!
In the last two years, we have worked with many other clients to help them comply with MTD and streamline their accounting.
Just suppose you had a system where your bank feeds your data directly into your accounts on a DAILY basis and you can take a photo on your phone of a purchase invoice and it is posted automatically. You can see your results, who owes you money, who you owe money to and your business bank balance 24/7, 365 from your smartphone.
We have MTD-compliant cloud accounting packages that give you:
- A clear picture of your current financial position, in real-time.
- Automatic updates that mean you can spend more time doing what you enjoy.
- Your accounts 100% online, so there’s no software to install and everything is backed up automatically. Updates are free and instantly available.
Please contact us about helping you to comply with the new rules. We are cloud accounting specialists and can train and support you with the right software.
Deferring October salaries to 6 November to reduce NICs – possible anti- avoidance
In last week’s newsletter, we suggested a possible strategy of delaying the end of October payroll run until after 5 November for certain employees to save NICs following the removal of the additional 1.25% for employees and employers from 6 November.
While such planning could be useful for delaying discretionary payments, such as bonuses and commissions, we should be alert to anti-avoidance provisions (in the form of Regulation 31 of the Social Security (Contributions) Regulations 2001 (SI 2001 No 1004)) that give HMRC the power to effectively reverse the planning and secure the NICs that would have been due had the regular payroll timing been maintained. Consequently, deferring the regular monthly salary is likely to be challenged by HMRC and we wouldn’t recommend this course of action.
If you would like to discuss the timing of planned bonuses, commissions or other payments, where there is not a contractual payment date, please do get in touch.
The small business category expanded
Thousands of UK businesses will be released from reporting requirements and other regulations in the future.
Currently, small businesses are presumed to be exempt from certain regulations. However, many medium-sized businesses (those with between 50 and 249 employees) still report that they are spending over 22 staff days per month on average dealing with regulation, and over half of all businesses consider regulation to be a burden to their operations.
The prime minister has announced plans to widen these exemptions to businesses with fewer than 500 employees in the future.
Regulatory exemptions are often granted for SMEs, which the EU defines as below 250 employees.
The government states this exemption will be applied in a proportionate way to ensure workers’ rights and other standards will be protected, while at the same time reducing the burden for growing businesses.
See: Red tape cut for thousands of growing businesses – GOV.UK (www.gov.uk)
Wales’ new 20mph default speed limit
Wales became the first UK nation to pass legislation to lower the default national speed limit on residential roads and busy pedestrian streets from 30mph to 20mph when the Senedd voted in favour in July this year.
Work is now underway to get Wales ready for the change, with the new speed limit coming into force on 17 September 2023.
Here are seven things you may not have known about the new 20mph default speed limit:
- The new 20mph default speed limit will save lives.
- People living in 20mph communities do support the new speed limit.
- It will improve the environment and help create safer communities.
- The new speed limits are reducing speeds.
- It is not a blanket speed limit.
- 20mph speed limits are already used in other countries.
- The new 20mph default speed limit will come into force in September 2023.
