MTD stands for Making Tax Digital. From April 2023 sole traders, partnerships and landlords with income above £10,000 will be saying goodbye to the yearly tax return and need to keep digital accounting records and use compatible software to send quarterly updates about their earnings to HMRC.
The aim is to create one account for each taxpayer for all their different taxes within HMRC. Via this account taxpayers will be able to view all of their payments. MTD is now in its second phase and will impose a new quarterly filing system for sole traders.
While 2023 may seem a long way off, it’s important to start thinking about it now as you may have to make a few small changes, for instance:
A separate business bank account.
If you haven’t already, you will need a separate bank account for your business, separate from your personal income.
Move to a digital accounting platform.
There are a variety of different digital accounting platforms out there to choose from, take a look at GOV UK. Find software that’s compatible with Making Tax Digital for Income Tax on GOV.UK to ensure you are using compatible software.
Discuss MTD with your accountant.
Before signing up for MTD, speak with your accountant. This is a good idea as they will be able to aid you in making the move over to MTD.
Although this can be seen as a big and difficult change to the way you do business, there are plenty of positives to stepping into the digital world, such as:
Quarterly reporting.
This gives landlords a better understanding of their tax responsibilities and allows them to keep track of their payments. This means you will give more accurate information and have less chance of accidentally missing something out. You will be able to add information ‘as you go’ (via a mobile app), which will help to keep track of all your receipts and invoices and help to avoid you from missing out on any forgotten taxable claims. This will also be more useful if you are a landlord with multiple properties and will help you to keep track of each property separately.
No surprises.
There will no longer be that rush at the end of the tax year to make sure you have everything together and in on time. Everything will all be in one place and updated regularly. The digital system will also allow you to see (approximately) how much tax you owe ‘as you go’ instead of having the amount owed revealed to you and the end of the year.
Digital accounting.
Moving over to MTD and digital accounting means that you will benefit from the advantages of digital accounting. Including saying goodbye to piles of paper and instead of having all of your information in one place, there when you need it, instant with one click of a button. As well as being more sustainable.
A step forward.
The rest of the world and other industries are moving over to digital software. Hard copies are now becoming a thing of the past, therefore it’s a great thing that we are now going digital and taking advantage of the technology that is available and using it to benefit us and make running our businesses easier.
Making Tax Digital will be a big change; however, it will make tax easier and more efficient for you. There is also a lot of support available to aid you in making this change. So get ready for an exciting step forward.
Want to know more about MTD for landlords? Get in touch with Vicky today.
