HMRC give businesses an extra year to prepare for Making Tax Digital05/10/2021
A recent announcement from HMRC should give businesses some much-needed breathing room after a difficult two years: the timeline for Making Tax Digital for Income Tax Self-Assessment has been moved back by an entire year.
The government’s decision to forestall income tax changes until the tax year beginning April 2024 rather than apply them as planned from the tax year beginning 2023 is an acknowledgement of the difficulties faced by many businesses during the coronavirus pandemic. This new start date applies to both landlords and self-employed people with businesses with an income of £10,000 or more. General partnerships will not have to join Making Tax Digital for Income Tax Self-Assessment until the tax year beginning April 2025, and the start date for other types of partnerships has yet to be announced.
While many businesses will no doubt breathe a sigh of relief at this news – and rightly so, as extra time to prepare for change is always beneficial – we would urge all of our clients (and anyone else reading this) not to get complacent. It is vital that you make sure you are prepared for Making Tax Digital, as you could face fines and penalties if you fail to comply with the new rules. You also do not want to have to deal with the last minute stress and confusion of trying to put systems in place when you should be focussing on running your business.
The crux of Making Tax Digital is easy to understand: from its inception, businesses will have to use “functional compatible software” (such as Xero, Sage or QuickBooks) that can connect to HMRC systems through its Application Programming Interface (API). The software must keep and preserve records in a digital form, create a VAT or tax return from these digital records and provide HMRC with this information digitally, provide VAT and tax data on a voluntary basis, and receive confirmation of compliance from HMRC through the API.
There are a number of online accounting software packages that meet these criteria, and we are familiar with all of them. We can set you up with a suitable program, train you in its use, and ensure that you are ready to go as soon as you have to be.
If you want to prepare for Making Tax Digital with online accounting software – or if you want to learn more about Making Tax Digital – call our friendly team of tax experts on 0121 456 0190.