Overview
A major change in the way that we file tax returns is coming.
Making Tax Digital is part of the Government’s drive to get all businesses away from using paper records. From April 2024 this will necessarily involve all businesses that turnover more than £10,000 using software to keep their records. The changes initially impact sole traders and landlords. Unincorporated Partnerships will follow from April 2025. LLPs and companies are not yet within the scope of MTD.
From April 2024 all affected businesses will start to report to HM Revenue & Customs (“HMRC”) quarterly. The first quarter will cover the period 6 April 2024 – 5 July 2024. The report will have to be submitted by 5 August 2024 i.e. within 30 days.
At present there is no requirement to pay tax quarterly, but it is expected that this will follow in the next few years.
Accounting periods
To facilitate this reporting every trader, will have to report on a 31 March or 5 April year end. If at the moment a trader has a different accounting period end this will need to change during the upcoming 2023/24 tax year.
Key points
- All sole traders, partnerships and landlords turning over more than £10k will need to start using software for record keeping from 6 April 2024
- Any sole traders and partnerships (including LLPs) not already on a 31 March/5 April year end will need to change by the end of the 2023/24 tax year regardless of turnover.
FAQs
How many tax returns will I have to file each year under MTD?
Those caught by MTD will have to file quarterly reports in August, November, February and May each year plus an annual End of Period statement, which includes the final trading/rental profits plus any other income such as salary, dividends etc which are normally reported on your end of year Tax Return.
I’m a sole trader and a landlord, does all the information for these businesses go on the same quarterly report?
Currently the intention is that the quarterly reports are per business so a landlord who is also a sole trader will need to do two reports a quarter, with one final End of Period statement. Similarly if you have two separate sole trades then these will go on separate reports.
I have more than one rental property, will I have to submit more than one report?
All rental properties in the UK constitute one business and will be reported on the same form.
I only have properties overseas do I fall within MTD?
Yes, all Landlords with gross rental income before expenses in excess of £10,000 are obliged to fulfil their obligations under MTD, regardless of where the property is situated. Overseas properties are a separate business to UK properties so would need a separate report if the rental income is over £10,000 a year
My rental income is less than £10,000 but may go up in the future, when will I need to report?
If your rental income (or sole trader income for that matter) is less than £10,000 you do not need to report quarterly. Once your annual turnover goes above £10,000 you will be required to start reporting the following tax year.
I’m a partner in an LLP am I affected?
LLP’s are not yet within MTD, however they will be required to change their reporting period to match the tax year. So you may find you have additional tax to pay in 2023/24. There is no obligation to change the year end at Companies House so accounts can be drawn up to the current year-end, but you would then have to apportion the profits into the tax year.
Are there exemptions from MTD?
You have to turnover more than £10,000 as a sole trader, landlord or partnership to fall within MTD. The only exemptions from MTD are due to some form of disability or religious belief. The exemption would need to be applied for. Overseas companies owning UK property are also exempt.
How can RPG help?
RPG Crouch Chapman have a range of software solutions to help clients with fulfilling their obligations under Making Tax Digital. We will also be able to assist in filing quarterly reports and end of year statements. So if you are a Landlord, sole trader or partner please get in touch to discuss your needs.
