Making Tax Digital
Making Tax Digital (MTD) for Income Tax Self-Assessment is set to come into effect from 6 April 2024. MTD came into effect for all VAT registered businesses trading over the VAT registration threshold of £85,000, from April 2019. It was introduced in an effort to ‘close the tax gap’. The tax gap being the £8.5 billion annual tax deficit that the government believes exists between tax that should be paid and tax that is actually collected on time.
HMRC believes that by requiring businesses to keep digital records and submit information more regularly this deficit will be reduced.
If you have income from a sole trade, a partnership or from property, or a combination of these, then this will impact you if your turnover is greater than £10,000 per annum. This is a threshold that will include many mobile DJs, as it equates to just £833.33 of income per month.
- Keep digital records of all business income and expenditure.
- Sign up for a new MTD for ITSA account with HMRC before 6 April 2024.
- Update HMRC at least every three months with a summary of income and expenditure using compatible software.
- At the end of your accounting period, finalise any profit and loss position via an end of period statement (or EOPS as it will be known) – this is where you’ll be able to make any adjustments for allowances and reliefs.
- Submit your final declaration – this effectively brings together everything above into one final declaration that must be submitted by 31 January the following year and will confirm to HMRC your tax liability.
HMRC believes that by requiring businesses to keep digital records and submit information more regularly this deficit will be reduced.
If you have income from a sole trade, a partnership or from property, or a combination of these, then this will impact you if your turnover is greater than £10,000 per annum. This is a threshold that will include many mobile DJs, as it equates to just £833.33 of income per month.
Action you will need to take
- Keep digital records of all business income and expenditure.
- Sign up for a new MTD for ITSA account with HMRC before 6 April 2024.
- Update HMRC at least every three months with a summary of income and expenditure using compatible software.
- At the end of your accounting period, finalise any profit and loss position via an end of period statement (or EOPS as it will be known) – this is where you’ll be able to make any adjustments for allowances and reliefs.
- Submit your final declaration – this effectively brings together everything above into one final declaration that must be submitted by 31 January the following year and will confirm to HMRC your tax liability.
