The good news is that if you’re self-employed, you will continue to benefit from lower NICs. 

Since April 2024, you will no longer have been required to pay Class 2 National Insurance.

Whether you’re a sole trader or own a business, Business Accounting Basics wants to make the process easier. Our solutions include a Tax Calculator that is quick and easy to use. We also offer a range of other tools to help you stay on top of your tax. 

Key Deadlines for the Tax Year

The UK tax year runs from 6 April to 5 April the following year. Dates to write on your calendar include:

• 5 October. This is the time to register for self-assessment if you’re new to filing.
• 31 October. You must submit paper tax returns for the previous tax year.
• 31 January. You should have filed online tax returns and paid any tax owed for the previous tax year.

Failing to meet these deadlines can result in unwanted penalties. For instance, a late filing can lead to an initial £100 penalty. 

Why Self-Assessment Can Be Complex

Even a small mistake in your tax return can lead to paying too much tax or penalties. One of the most common issues is keeping accurate records of income and expenses. Business Accounting Basics make this process much easier with expert advice on bookkeeping. We regularly support small businesses who do their own bookkeeping or use accounting services.

Ultimately, we can make the process much less stressful and time consuming. If you’re self employed, the last thing you want is to be worrying about tax over Christmas. 

Why Choose Us to Help with Self-Assessment?

We provide many resources for individuals and businesses navigating the complexities of tax and self-assessment. Our advice comes from a team with a deep understanding of HMRC requirements. 

Business Accounting Basics stays up-to-date with changes in tax law, ensuring our tools are useful and convenient. 

Advice Tailored to your Needs

At Business Accounting Basics, we recognise that every individual and business is unique. We take the time to get to know your circumstances. 

Save Time this Season

Filing your self-assessment tax return can take hours. It’s especially time consuming if you’re

unfamiliar with HMRC’s processes. 

With our helpful tools, you can save valuable time and focus on what matters most—whether that’s growing your business or enjoying time with family and friends. 

Accurate Record-Keeping

Quality record-keeping is essential for filing accurate returns and defending against potential HMRC audits. With our expert advice and tools, you can reduce the risk of errors and have everything you need for a smooth filing process.

Reduce Stress During the Process

Navigating tax laws can be daunting. It’s particularly pressurised if you worry about penalties or audits looming. Our advice can make the self-assessment process easier, ensuring you feel confident in the process. 

Make the Most of our Digital Tools and Support

We offer the latest accounting software to streamline your self-assessment process. Our team is always happy to provide information on the latest tax changes which affect your circumstances, whether you run a small business or work freelance. 

Why Accuracy Matters in Self-Assessment

Accuracy is crucial when filing a self-assessment tax return. Mistakes can lead to:

• Overpayment: Missing out on deductions or allowances.
• Underpayment: Leading to penalties and interest charges.
• Scrutiny from the HMRC: Triggering audits or investigations.

By choosing Business Accounting Basics, you will have excellent resources to make tax less ‘taxing’. All our resources are free, easy to understand and practical. They’re created by a team with years of experience and with over 350,000 templates available, it’s easier to simplify the accounting process. 

We offer plenty of advice for self-employed individuals and freelancers. For instance, it helps to separate personal and business accounts to avoid confusion. Invoicing regularly can help you maintain your cash flow, and means you can keep records of income and expenses.

Additional Support from Business Accounting Basics

Beyond self-assessment, we offer advice on many different topics, including:

• Bookkeeping: Keeping your financial records organised and up-to-date.
• VAT Returns: Managing your Value Added Tax obligations.
• Payroll Services: Ensuring your staff are paid accurately and on time.
• Business Advice: Providing strategic insights to help your business grow.

Whether you’re filing your first return or dealing with a complicated tax situation, our website can prove to be invaluable. Choose us to advise on your self-assessment journey and you can proceed with ease and confidence. We have a comprehensive guide for anyone self-employed, including free bookkeeping templates. 

Read our latest blog on self employment and tax. 

The post Self Employed and Need Help Dealing with Tax? appeared first on Business Accounting Basics.

In this blog post, we’ll explore the numerous benefits of filing your tax return early, from quicker tax refunds to enhanced tax planning opportunities. Get ready to embrace the advantages of early tax return submission and revolutionise your financial life!

Short Summary

• Submitting your self-assessment tax return early can provide various benefits, such as faster refunds, improved cash flow management and better access to loans.
• Early submission can significantly reduce the filing process’s stress and allow more time to budget and identify exemptions/reliefs.
• Filing taxes early provides enhanced accuracy and opportunity for corrections before the deadline while avoiding HMRC’s peak season.

The Perks of Early Tax Return Submission

Submitting your return early can unlock benefits beyond avoiding penalties for late filing. Early submission of your self-assessment tax return can lead to faster tax refunds, reduced stress, improved cash flow management, and even better access to loans and mortgages. Don’t wait until the last minute to file your tax return; instead, seize the opportunity to improve your financial situation by submitting your self-assessment tax return early.

Filing your self-assessment tax return early helps you avoid late filing penalties and ensures that you receive any overpaid tax refund promptly. Additionally, early submission allows for more effective self-assessment tax bill management and increases tax planning opportunities.

In the following sections, we’ll delve into the numerous advantages of early return submission.

Quicker Tax Refunds

One of the primary benefits of filing early is the potential for quicker tax refunds. By filing your assessment tax return early, your return is processed sooner, which means you’ll receive any overpaid tax refund faster than if you waited until the deadline. This improved cash flow can help you manage your tax owed more effectively and alleviate financial stress.

For self-employed individuals, a faster tax refund can be especially beneficial. A P60, which outlines your earnings and tax paid for a given tax year, may not always be available or sufficient to prove your income. By filing your tax return earlier, you can provide evidence of your income more quickly, helping you easily secure loans, mortgages, or other financial products.

Reduced Stress

Another notable advantage of filing early is the reduced stress and anxiety associated with last-minute filing. Completing your self-assessment tax return well before the deadline, you can avoid the panic and pressure often accompanying the rush to file. Incorporating assessment early into your financial planning can help you better manage your tax obligations.

Moreover, early submission allows you to tackle any unexpected issues or complications that may arise during the filing process without the added stress of an impending deadline. This means you can take the time to ensure the accuracy of your return and avoid potential penalties for errors or omissions.

Improved Cash Flow Management

Filing your tax return early ensures you receive your tax refund sooner and contributes to better cash flow management. By having a comprehensive view of your financial situation, you can make more informed decisions about your cash flow and allocate funds accordingly.

In the next subsections, we’ll discuss how early tax return filing provides more time to budget and helps avoid late payment penalties.

More Time to Budget

Effective budgeting requires careful planning and diligent tracking of income and expenses. By filing your tax return early, you gain additional time to plan for your self-assessment tax bill and adjust your finances. This extra time allows you to make any necessary adjustments to your budget and ensure you have the funds available to cover your tax bill.

Furthermore, filing early enables you to identify potential discrepancies or errors in your return, providing ample time to correct them before the deadline. This proactive approach to budgeting can help you avoid unexpected financial setbacks and maintain better control over your finances.

Avoid Late Payment Penalties

Late payment penalties and fines can be an unwelcome surprise for those who miss the deadline for filing their tax return. Filing early can avoid these penalties and ensure you have the funds to cover your tax bill.

Additionally, early filing allows you to set up a budget payment plan or make arrangements with HMRC if you cannot pay your tax bill in full by the deadline. This proactive approach can help you avoid late payment penalties and keep your finances on track.

Enhanced Tax Planning Opportunities

Filing your tax return early offers many tax planning opportunities, allowing you to take full advantage of exemptions, reliefs, and tax-saving strategies. By submitting your tax return ahead of schedule, you can identify potential savings and adjust your finances for the upcoming tax year.

In the following subsections, we’ll discuss the benefits of identifying exemptions and reliefs and implementing tax-saving strategies.

Identifying Exemptions and Reliefs

Tax exemptions and reliefs are government policies designed to reduce tax payments for eligible taxpayers. By filing your tax return early, you have ample time to identify any exemptions and reliefs for which you may be eligible, potentially reducing your tax bill.

Some common exemptions and reliefs include deductions, credits, exclusions, and tax-free allowances. By taking the time to research and understand these policies, you can maximise your tax savings and minimise your tax liability, putting more money in your pocket.

Implementing Tax-Saving Strategies

In addition to identifying exemptions and reliefs, early tax return filing provides the opportunity to implement tax-saving strategies for the upcoming tax year. These strategies may include maximising deductions, contributing to a pension, utilising tax-efficient funds, considering charitable donations, investing in an ISA and taking advantage of tax-free allowances.

By planning and implementing these strategies, you can optimise your tax savings and ensure you’re making the most of your hard-earned money.

Minimising Errors and Mistakes

Submitting your tax return early can help minimise errors and mistakes that could result in penalties or additional scrutiny from HMRC. The early filing allows for increased accuracy and ample time for corrections before the deadline.

In the following subsections, we’ll discuss the benefits of increased accuracy and having time for corrections.

Increased Accuracy

Filing your self-assessment tax return early increases the accuracy of your return, reducing the risk of penalties or fines. By taking the time to carefully review your tax return and ensure all information is accurate, you can avoid potential fines and scrutiny from HMRC.

In addition, early filing affords you the time to gather any necessary documentation and consult with a tax advisor if needed. This proactive approach can help ensure your tax return is accurate and complete, minimising the risk of errors and mistakes.

Time for Corrections

One of the key benefits of early filing is the time it provides for making corrections before the deadline. If you discover an error or omission in your tax return, early filing allows you to make the necessary corrections without the pressure of an impending deadline.

By taking advantage of the extra time provided by early filing, you can ensure that your tax return is accurate and complete, reducing the risk of errors and mistakes.

Better Access to Loans and Mortgages

Early self-assessment tax return filing can lead to better access to loans and mortgages by providing proof of income more quickly and efficiently. This can be especially beneficial for self-employed individuals who may not have a traditional salary or wage as proof of income.

In the following subsections, we’ll discuss the benefits of early filing for self-employed individuals and how it can expedite the loan or mortgage application process.

Proof of Income for Self-Employed

For self-employed individuals, proving income can be challenging when applying for loans, mortgages, tax credits or other financial products. By filing your self-assessment tax return early, you can provide proof of income faster and more efficiently than waiting until the deadline. Some financial products may require an accountant to verify the figures.

In addition to tax returns, self-employed individuals can provide bank statements, profit and loss statements, and an accountant’s letter as proof of income. Having this documentation readily available lets you improve your chances of securing the financing you need.

Faster Application Process

Filing your tax return early can expedite the loan or mortgage application process for self-employed individuals by providing the necessary proof of income. This can enable lenders to make an informed decision about your loan or mortgage application, potentially improving your chances of obtaining the financing you need.

Additionally, completing your tax return early can help streamline the application process by ensuring that all required documentation is available and up to date. This can save time and reduce the likelihood of delays in obtaining financing.

Avoiding HMRC’s Peak Season

Filing your tax return early can help avoid HMRC’s peak season, typically around the self-assessment deadline. During this busy period, response times from HMRC can be slower, and dealing with HMRC can be a more stressful experience.

In the following subsections, we’ll discuss the benefits of faster response times and a less stressful experience when dealing with HMRC.

Faster Response Times

By filing your self-assessment return early, you can benefit from faster response times from HMRC, reducing the time you spend waiting for answers to your queries. This can make the tax filing process much more efficient and less frustrating.

To further expedite response times, try contacting HMRC during less busy periods, such as early morning or early lunchtime. Being proactive and avoiding peak periods can ensure a smoother and less stressful experience when dealing with HMRC.

In 2023 HMRC closed the self-assessment phone line for three months; if you have an issue with your self-assessment tax, you might not be able to file it as early as you want.

Less Stressful Experience

Filing your self-assessment tax returns early can lead to a less stressful experience when dealing with HMRC. By avoiding HMRC’s peak season, you can benefit from quicker response times and potentially more accommodating staff, making the overall process less arduous and more manageable.

Early filing allows you to tackle any unexpected issues or complications that may arise during the filing process without the added stress of an impending deadline. This means you can take the time to ensure the accuracy of your return and avoid potential penalties for errors or omissions.

Summary

In conclusion, submitting your self-assessment tax return early offers numerous benefits, including quicker tax refunds, reduced stress, improved cash flow management, enhanced tax planning opportunities, minimised errors and mistakes, better access to loans and mortgages, and avoiding HMRC’s peak season. By taking advantage of these benefits, you can improve your financial situation and enjoy a more efficient and stress-free tax filing experience. Don’t wait until the last minute; start reaping the rewards of early tax return submission now!

Frequently Asked Questions

Can I submit my tax return early?

You can submit your self-assessment tax return early; payment on account is due on 31 January and the next on 31 July. By completing an early return at the start of the tax year in April, you’ll better understand how much you owe for the year and can plan for future payments.

If you’ve overpaid, you should receive your refund sooner.

When can I file my 2023 self-assessment tax return UK?

You can file your 2023 tax return UK on 6th April 2023 once the tax year has ended.

Payment, registration and submission deadlines fall on 31st July, 5th October, 31st October and 31st January.

Is it better to file a tax return early or late?

It is better to file self-assessment tax returns as early as possible in the new tax year since this will allow you to save up for your tax bill.

By filing early, you can take advantage of deductions and credits that may not be available later in the year. You can also avoid the rush of last-minute filers and potential errors when filing quickly. Additionally, additional information is provided below.

How long does it take for HMRC tax refund to go into the bank?

It typically takes HMRC from 2 to 12 weeks to process your tax refund, followed by several days to 3-4 weeks before it enters your bank account.

This means you should expect to wait at least 12 weeks before receiving your refund. However, it could take longer, depending on the processing time.

How can early tax return filing improve my chances of obtaining a loan or mortgage?

Filing your self-assessment tax return early can improve your chances of obtaining a loan or mortgage by providing proof of income more quickly, especially if you are self-employed.

The post Benefits of Filing Your Tax Return Early appeared first on Business Accounting Basics.

When filing your tax return, there are several things to consider. You must accurately report your income and any expenses incurred during the year. This includes wages, pensions and income from investments and other sources. You must also declare any deductions taken against your taxable profits and calculate how much capital gains tax is due on any investments you have sold.

This article will outline the different aspects of completing a tax return for self-employed individuals, whether you are a sole trader or in a partnership. We’ll explain what information you need to provide, how you can calculate your taxable profits and the different ways of paying tax.

Who Needs to Complete Self-assessment Tax returns?

You must complete a return if you are self-employed as a sole trader and have earned more than £1000 before taking off any deductions.

This also applies to landlords renting out a property, people with untaxed income such as tips or foreign income, or those with investment and savings income that is not already taxed at source.

If you are in a partnership, you must complete an SA800 tax return and a self-assessment tax return SA100.

Self Assessment and MTD

The government is introducing a tax system called making tax digital (MTD). This means that self-employed individuals and landlords must keep digital records of their business transactions. These records can then be used quarterly to submit taxes through an approved software solution.

The introduction dates are from 6th April 2026 with an income over £50,000 and April 2027 with an income over £30,000. The income includes both business and property.

Can I Complete my Own Tax Return?

Yes, you can complete your own tax return as long as you are confident in correctly understanding the information and how to report it. However, if you have any doubts or concerns, it is advisable to seek professional advice from accountancy membership organisations UK.

An accountant can provide expert advice on tax planning strategies that may save you money and ensure that all deductions and allowances are claimed, which may reduce the amount of tax due. They will also be able to keep track of all changes in legislation so that your returns are updated accordingly.

Tax Return Software

There are several providers of tax return software which make completing a tax return simpler and more efficient. The software will guide you through entering your financial information, calculating the amount of your tax bill, and then generating a completed return for you to submit to HMRC.

The software is generally very user-friendly and allows you to enter information at your own pace. It will also provide information on deductions and allowances to which you may be entitled, which can reduce the amount of tax due on your return.

In the future, most accounting software packages will include the feature to submit tax returns under Marking Tax Digital.

How to Register for a Self-Assessment Tax Return

To register for self-assessment, you will need to sign up with HMRC and get a government user ID. You will then be sent a 10-digit Unique Taxpayer Reference (UTR) number, which must be kept safe and used when filing a tax return. If you can’t sign up online, you can phone them.

Once registered, you will receive an annual tax return form to complete online. This will detail your income and deductions for the past year alongside any other information HMRC need to calculate the amount of tax you owe.

It is essential to ensure all information on your tax return is accurate, as any mistakes can lead to an investigation and potential fines.

What is the self-employment tax Year?

The self-employed tax year runs from 6th April to 5th April the following year. Any income earned between these dates must be reported on your tax return.

The deadline for filing a paper self-assessment tax return is 31st October, or if you file online, it is by midnight on 31st January following the tax year end.

How to Complete a Self-Employed Tax Return

Gather all the Information for the tax year

The process for completing a self-employed tax return is straightforward. Firstly, you will need to gather all the information required by HMRC, including the following:

• Self-employed income and expenses
• Rent received
• Employment income
• Income from overseas
• Pensions payments and income, including any state pension
• Certain benefits income if it is taxable
• Investments
• Gift Aid donations
• Capital gains or losses from selling assets
• Student Loans

Check your Personal Details

The next stage is to check your personal details, including name, address, National Insurance Number and date of birth. If any details are incorrect, you can change them now.

Complete the Sections that Apply to You

When completing the Self-Assessment Tax return online, it will guide you through the complete process. You start by deciding which sections are relevant to you.

The process will then guide you to complete each section that is needed.

Tax Calculation

Once you have completed all the required sections, HMRC’s online system will calculate your self-assessment tax return. It will also provide a breakdown of your tax credits, deductions and allowances.

Submit Your Return

Once you have carefully checked the correct details and all information has been included, you can submit your self-assessment tax return. This is usually done by submitting the completed form online via HMRC’s secure website.

Keep Records

It is vital to keep a copy of your tax return, as you may need it in the future for reference. HMRC may also request copies of any relevant information when conducting an audit.

You will also need to keep all the records that relate to your tax return for at least five years after the 31st January submission date. The records include bank statements, invoices, bills, bank interest statements, pension records, and other related paperwork.

How to Calculate Self-Employed Income and Expenses

Calculating your income and expenses can initially seem daunting if you’re self-employed. However, with the help of your bank statements, invoices, and any other relevant documents you may have, it doesn’t have to be as difficult as you might think.

Bank statements will show any money entering and leaving your accounts – this is the easiest way to determine how much money you have made during a period. Make sure to keep a record of invoices sent out for work done so that they can be counted towards your income.

Track all your business-related allowable expenses, such as payments for goods, services, utilities and supplies.

On the tax return, there are two ways to record the business’s expenses; if the turnover is below £90,000 from 2024, you can enter the total expenses. For turnover above £90,000, you are required to enter the individual expense amount.

These records will help produce an income and expenses report and a balance sheet. These figures are used in your self-assessment tax return. There are several different ways to record the transactions for the tax year, including:

Accounting Software

Using accounting software such as Xero, FreshBooks, Sage, or QuickBooks will help you keep up with your self-assessment tax return. These packages usually come with inbuilt features and services that allow you to track income, expenses and payments easily.

They include features that make it easier to record transactions and run your business, including:

• Importing bank transactions
• Reconciling accounts
• Producing accurate reports
• Receive payments online
• Professional Invoices
• Tracking stock
• Calculating wages

Excel Bookkeeping Templates

For those not comfortable using accounting software, it is possible to use an excel bookkeeping template. This will allow you to record income and expenses using a spreadsheet. It may be helpful for small businesses or freelancers with low turnover.

At Business Accounting Basics, we have produced over 25 free bookkeeping templates to assist with different accounting aspects like cash book, profit and loss, accounts receivable, sales invoices and lots more.

Ledger Book

For those who prefer a more traditional approach, you can record your transactions using a ledger book. This involves entering all transactions into the appropriate columns and sub-divisions. It is essential to keep the ledger book up to date so that it remains accurate.

Once all entries have been recorded at the end of the tax year, your ledger book should be able to produce an income and expenses report. This will provide the information needed for the completion of the self-assessment tax return.

If you’re unsure how to calculate your self-employed income or expenses for a tax return, it is recommended that you seek professional advice from an accountant.

How much Tax do I have to Pay?

Once your self-assessment tax return has been received and processed, you will receive a statement of how much tax and National Insurance is due or if there is a refund due to overpayment.

To check your payments due, sign into and view your account. It will show a breakdown of payment amounts and dates.

Income Tax Rates for Self Employed

The tax you will pay depends on the total income for that particular year. Income tax rates are set by HMRC and are applied to different levels of taxable income.

For the 2023/2024 financial tax year, the self-employed tax rates for single :

Personal allowance up to £12,570 is tax-free.

£12,571 to £50,270 is 20%, the basic rate of tax.

£50,271 to £150,000 is 40%, the higher rate of tax.

Over £150,00 is 45%, called the additional rate. it will be lowered to £125,140 from 6th April 2023.

If you earn over £125,140, you will not receive a personal allowance. For earnings over £100,000, for every £2 earnt, £1 will be withdrawn from the personal allowance.

Class 2 National Insurance Contributions

Class 2 NI is paid if profits are more than £12,570 for the tax year 2022/2023 and are calculated at £3.45 per week.

Class 4 National Insurance Contributions

Class 4 NI is paid if profits are £12,570 or more a year. There are two different rates:

9% on profits between £12570 and £50,270

2% on profits over £50,270

Self Assessment Tax Calculator

You can use the online self-assessment tax calculator to check how much tax and NI you may be liable to pay for the tax year. This will give you an estimate of your tax liability based on the information you enter. The tax calculator is only suitable for calculating self-employed income; it does not include income from other sources.

This tax calculator works on Self-employed only up to £100,000.

What are Payments on Account?

Payments on the account are payments of estimated tax due based on the previous tax year before submitting your self-assessment tax return. You will have to make a payment on account if your previous tax bill was over £1,000.

Payments on Account are 50% of the previous year’s tax bill; the first payment is due by 31st January, and the second payment is due by 31st July.

Self Employment Tax Deadlines

As self-employed, there are several tax deadlines that you must be aware of.

If you are newly self-employed, you must register for self-assessment by 5th October on your second trading tax year. For example, if you started self-employment In June 2022, you must register by 5th October 2023.

31st January is the deadline for submitting your self-assessment tax return and making any payments on account and final payments.

31st July payment on account for the tax year.

If you have missed these deadlines, it is important to contact HMRC as soon as possible to inform

How do I pay my Self-Assessment Tax Bill?

There are several ways to pay your tax bill; whichever method you use, you will need to leave enough time for the payment to clear by the deadline. The options to pay tax are

• Online or telephone banking
• CHAPS
• Debit or credit card – there is an additional charge for using business credit cards
• At a bank or building society
• BACS
• Cheque by post
• Direct Debit

Once payment has been made for your tax bill, it is always worth checking it has been received by using your online account.

Budget Payment Plan

It is also possible to set up a weekly or monthly payment plan. To set up a payment plan, you must access your online account and follow the instructions to set up a direct debit.

Late Payments for your Tax Bill

If you fail to pay on time, HMRC will impose a late payment penalty. The penalty amount depends on how late the payment is; you will also be charged interest. If you cannot pay your full tax bill, contacting HMRC as soon as possible is important.

Self-Assessment Return Conclusion

Self-assessment tax can seem daunting and complicated, but you can easily manage your taxes with the right knowledge. Knowing when to register for self-assessment, how much income tax you’ll owe based on your total profits, understanding payments on account, and deadlines are all crucial steps in filing a successful self-assessment tax return.

With so many different ways of paying tax, such as online banking or direct debit, it’s easy to ensure everything is handled before the deadline.

Finally, if there are any problems related to filing or paying your taxes, don’t hesitate to contact HMRC for help – they have experienced advisors who can assist you quickly and efficiently.

Disclaimer

The content provided on this page is for informational purposes only and should not be considered tax advice. You should always speak to a qualified professional before making decisions concerning your Self-Assessment return.

The post Tax Returns for Self Employed appeared first on Business Accounting Basics.

ITSA is Income Tax Self Assessment.

In this article, we will look at the following:

• What is Making Tax Digital (MTD)
• Making Tax Digital Deadlines
• The plans for Income Tax Self Assessment
• Why the delay?
• How to comply with MTD

What is Making Tax Digital?

Making tax digital is part of HMRC’s policy to get all businesses to file tax records digitally. The idea is that in time the whole system will be paperless.

Small Businesses are required to keep digital records and use third-party software to submit tax returns to HMRC.

MTD for VAT was introduced in April 2019 for VAT registered businesses over the threshold of £90,000.

The reason for introducing MTD is to:

• Reduce errors in business accounts and therefore reporting is correct for taxation.
• Reduce paperwork.
• Integrate business administration and taxation.

The following accounting packages are all MTD ready:

What are the Making Tax Digital Deadlines?

As a small business owner, it is essential to know any tax deadlines.

Here are the MTD deadlines for both VAT-registered and self-employed

MTD for VAT Deadlines

April 2019, all businesses over the VAT threshold of 90,000 were registered.

From April 2022, small businesses registered for VAT will need to comply.

MTD for Income Tax Deadlines

Making tax digital for income tax was a deadline of April 2023; it is extended to April 2026.

It is for taxpayers with business or property income above £10,000. It will include landlords, sole traders and partnerships.

At the moment, there is no fixed date for all MTD for income tax, but I am sure it will be announced soon.

Making Tax Digital Self-Employed

If your earnings are over £1,000, you need to register as self-employed and complete a self-assessment tax return.

You can also register as a sole trader if your earnings are under £1000. There are a few reasons why you may want to do this, including:

• To claim tax-free child care
• Voluntary contributions to Class 2 National Insurance

Currently, only businesses with business or property income over £10,000 will need to be MTD for income tax ready by April 2026.

The easiest way to ensure that you are MTD is to use compatible software.

There are many different options for software, and it is worth taking your time to choose the best accounting software for your small business. Options included both paid and free versions.

The other option is to use bridging software that works with non-compatible software like spreadsheets, accounting systems and other digital bookkeeping products.

It lets you send the required information digitally to HMRC in the correct format.

Making Tax Digital for VAT

MTD for VAT was introduced in April 2019 for businesses over the VAT threshold of £85,000 for taxable turnover; this has now increased to £90,000.

Businesses can opt-in if their business is under the VAT threshold. It is estimated that about a quarter of those under the threshold has opted in. From April 2022, all companies registered for VAT will need to produce digital records.

If you are registered for MTD, the chances are you will file vat returns online through accounting software.

MTD for Corporation Tax

The government is still planning for corporation tax but has suggested it will not start until at least 2026.

It will give small businesses and accountants more time to get ready.

Why the delay?

Over the last couple of years, businesses have struggled to survive due to the Covid pandemic and changes with Brexit.

Businesses are still trying to recover and may have issues with the supply of products to continue work.

With all the stress of running a business, some will be glad of one change they do not need to implement yet.

Is it Worth Getting MTD Ready?

Although, as a business, you do not need to be ready for making tax digital for income tax yet, it is worth spending the time deciding if the company will be better off getting ready.

The reasons for this are:

• Digital records by using software will help businesses make decisions.
• It is easier at the end of the accounting period to produce the reports required.
• Automating the accounts can save time and money.
• Professional branded invoices using a logo.
• Customers can settle bill payments through the software.
• Keeping track of debts.
• Bank feeds are automatic once set up with open banking.
• Accurate digital record-keeping.

Do I need a Bookkeeper or an Accountant for MTD?

Although you do not need an accountant or bookkeeper to complete your tax, they can be an asset to the business.

One of the main advantages is knowing the tax rules and what the business can claim for. It will help to reduce the tax bill.

A bookkeeper or an accountant can take the stress away from completing the accounts and allow you to concentrate on the sales and other admin tasks.

Making Tax Digital Accounting Software

There are lots of options for accounting software, most of which are MTD Compliant.

It is worth taking your time to choose the best accounting software for your small business. Start by making a list of everything you need; this may include:

• Stock
• Time management
• Expense Tracking
• VAT
• Making tax digital
• Invoicing templates
• Mileage
• Departments

We have produced a list of our best accounting software for small businesses. It looks at the best options for different business types.

Our top options for accounting software are QuickBooks, Xero, Ember and Zoho Books.

One free option that some small businesses use is a software called WAVE Apps. Unfortunately, it will not be compliant with making tax digital. WAVE is concentrating on the Canadian and US markets.

A complete list of accounting and bridging software is available on the HMRC website.

Making Tax Digital for Income Tax Conclusion

Self-employed businesses and landlords with a taxable income over £10,000 will need to be compliant with making tax digital from April 2024. The date was April 2023.

VAT-registered businesses with a turnover of over £90,000 are already using MTD to submit VAT returns.

The easiest way to comply with digital tax is through online accounting-compatible software.

The post Making Tax Digital ITSA Delayed appeared first on Business Accounting Basics.

Making tax digital for business will start affecting the smaller businesses which are not registered for VAT. It is expected to commence in April 2019. It is still unclear from HMRC if it will include all small businesses or if very small ones will be excluded.

Small companies will have to submit their accounts online to HMRC quarterly, which is in line if you are VAT registered. It is unclear at the moment how this will be done and which accounts software will provide the feature. I would expect that most of the main accounting package providers will be able to submit directly to HMRC, but will need to amend their software.

The government has to still write the legislation and until this is done there are no clear guidelines.

Making Tax Digital for Business – Why do we need it?

One of the main reasons for converting to digital tax is to reduce the amount of errors that are made. HMRC reports that over £8 million is lost in avoidable tax errors.

At the moment small business owners find it difficult to know how much tax and NI they owe until they complete their self-assessment tax return. With the pressure of running a business, they are sometimes not submitted until the deadline. This can then leave the business owner needing to pay the whole figure immediately. Digital tax will mean that you can calculate the figure owed over the course of the year.

Digital Tax should I get ready?

If you are a small business, it may be worth starting to use a full accounting software package like Xero, QuickBooks or Sage. This will allow you to get up to speed with the process of doing your own accounts.

If you have not got the knowledge or time to complete your own accounts then now could be the time to get a bookkeeper or accountant in to help. Bookkeepers can get very busy and may not have time to take on new clients when the digital tax is implemented.

Make sure if you do take on a bookkeeper that they are qualified and have the correct insurance in place. They also need to be covered under anti-money laundry.

Further information can be found on the HMRC website.

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