Current H M Revenue & Customs guidance indicates that self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2023.
Please note that HMRC guidance indicates that MTD for Corporation Tax/Companies will not be introduced before 2026.
Current HMRC guidance indicates that the self-employed and landlords with income of above £10,000 will need to do the following:
- Keep digital records
- Send business income and expense updates quarterly to HMRC
- Submit a final income/profit declaration.
HMRC has yet to issue further guidance, however it is important that affected clients start to prepare for the scheme over the next two years.
We recommend that you have a separate bank account for each business or rental property portfolio.
This is not only good accounting practice and reduces the work involved in preparing your book-keeping and accounts, but will enable the efficient preparation of your quarterly submissions for MTD to HMRC.
In respect of drawings, these may still be taken as and when you choose, but we recommend doing so once or twice a month as a lump sum to keep the transactions to a minimum.
If not already in place, we recommend that you set up access to online banking so that bank transactions for your bank account may be easily downloaded in a digitally acceptable format as and when required.
By starting this process now, you will be ready when MTD for income tax is introduced
For those clients where we undertake the book-keeping, we understand that the software we use will be MTD compliant for Income Tax.
We hope that the above information is of assistance. As we receive more detailed information on MTD for income tax, we will advise our clients accordingly. In the meantime, should you wish to discuss the above then please get in touch with your normal contact at Pacific.