What is Making Tax Digital?
Making Tax Digital (MTD) is a Government Initiative designed to modernise the UK tax system. Gone are the days of keeping a shoebox full of invoices and receipts, or even trying to manage your businesses finances on a spreadsheet. MTD will force those, who are for want of a better description ‘stuck in their ways’ into bringing their businesses into the 21st century.
HMRC’s first stage of implementing MTD was back in April 2019 when they changed the way that VAT returns were submitted. Given that VAT returns were already submitted quarterly this was a logical first step for their digital transformation. The change that is proposed for 6th April 2024 is a different kettle of fish altogether. From the 6th of April 2024 MTD for Income Tax and Self-Assessment (ITSA) is being introduced, and this is going to be in no way shape of form a subtle change.
How ITSA currently works
For the past ‘God knows how long’ personal tax returns have been submitted once a year. Either by the 31st of October for paper returns, or by the 31st of January for digitally submitted returns. Your PAYE income, Dividends, Rental Property income, Savings income etc. is all factored in and your income tax is paid accordingly… often with a payment on account (https://shoebox.co.uk/payments-on-account-for-the-self-employed-what-are-they-and-do-i-have-to-pay-them/). From 6th April 2024 you/we are going to have to make 5 submissions during the fiscal year as opposed to just the one. When we said this was a big change, we weren’t kidding.
Paper returns will be a thing of the past
Not that many of us still do, but the circa 450,000 people that are still submitting paper returns will no longer be able to do so. All income and expenses will need to be recorded using a HMRC approved software. A digital submission will need to be made quarterly, and then a final ‘end of year’ submission will need to be made. We are assuming that the quarters will fall in line with the fiscal year and that the final submission will need to be made by January 31st, however these details are yet to be confirmed by HMRC.
How can Shoebox help?
Well, the good news is that we are already set up for ITSA. Early bird catches the worm as they say. We create an online portal called Freeagent for all of our clients, from the SME, Contractors, Freelancers, the Self Employed, or the Landlords. Freeagent has been used by Shoebox since our inception and through their continued development it has allowed us to truly be an industry leading digital accountancy service provider.
We pride ourselves on our service, and we wouldn’t be able to offer such a well-received offering without our personal accountants. All of clients, big or small have a dedicated accountant who is on hand to respond to ensure that you are working as tax efficiently as possible. Afterall, this is what good accounts do.