MTD for self-employed
Making Tax Digital for Business is a Government initiative also known as MTD. This is a legal requirement implemented and monitored by HMRC – Her Majesty’s Revenue and Customs.
Now that we know the meaning of understanding Making Tax Digital – MTD in Part 1 to 3, this is Part 4 of the series which explains MTD for self-employed.
Key compliance
- Keep records digital
- Submit the return at least every 3 months
- Final submission 10 months after year-end or 31 January whichever is sooner.
- Pay your tax by 31 January after the year-end (can be paid early)
Date MTD compliance starts
You must follow the rules for your next accounting period that starts on or after 6 April 2023, if your taxable turnover from your self-employed business or income from the property is above £10,000.
Who will need to comply with MTD?
- Sole traders
- Partnership & each partner
- Limited companies
- Limited Liability Partnerships
- Landlords
- Individuals with over £10,000 as a second income.
Example: Self-employed Sam with more than £10,000 untaxed income
Sam is a self-employed electrician. His business is growing and he has recently crossed the VAT threshold. He has taken on two employees. He has also appointed an Accountant to help him with his tax affairs.
- Tax management is not part of Sam’s everyday activities for running his business
- He often does his books weeks in arrears and sometimes make basic record-keeping errors
- The step-change in tax responsibilities means Sam needs additional support
- He relies on his Accountant to tell him how much money to set aside for tax
- He does not entirely understand his tax position and lacks the confidence to exploit growth opportunities
- As his earning is above £85,000, Sam should record his income and expenses digitally and submit VAT and other information to HMRC quarterly
- Sam’s record-keeping software helps him keep on top of his business finances, including payroll, on the move
- Sam’s digital tax account uses information from his record keeping software
- In his digital tax account, Sam can see all of his taxes information together in real-time
- Sam’s accountant can see the same information
- Both Sam and his Accountant can set up new employees and register for new services from his digital tax account
- HMRC signposts Sam to interactive guidance and sends him relevant personalised messages
- Sam chooses to make a single payment quarterly to cover his Self-Assessment and VAT liabilities, simplifying his finances.
For more detailed information, please download the full report from this link.
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Sterling Finance UK Limited
Website : www.sterlingfinance.net
Email : info@sterlingfinance.net
Tel : 0161 339 4989
