Making Tax Digital and Self-Assessment
How will the changes in how you complete your self-assessment tax returns effect you?
The changes will happen in April 2024 and most people who are registered for self-assessment will be caught up in the new regulations.
All sole-traders and sole landlords who are in business on the 5thApril 2023, will fall under the new system from April 2024 if their gross turnover exceeds the Making Tax Digital threshold of £10,000. This start date applies no matter what the current trading year ends are.
There are no plans now for Partnerships, but we assume that they will be brought in from April 2025.
All taxpayers, as noted above, will need to submit an update every 3 months on the same dates, 5th July, 5th October, 5th January and 5th April by one month after the above dates.
There is an additional End of Period Statement that will be an annual total of the figures that are currently reported on the self-assessment and property pages of a personal tax return. The complication with this is that to start with this report must be completed on the first accounting period end after April 2024 not when you have completed 4 quarterly returns. You may find yourself in the position of having to complete both a tax return and the new reports for a few years, in addition if there is additional income, for example interest or dividends, these will still need to be included in a standard tax return.
For example:
David is a financial consultant who makes up his accounts to the tax year end: 5 April.
Davids’ digital start date is 6 April 2024. Dominic will submit his first quarterly updates, SA tax returns and EOPS on this timetable:
Quarterly reports July, October January and April, in addition he will have to complete and submit a tax return for the year to 5th April 2024. Then he will also have to do his annual summary for the period April 2024 to March 2025 to be submitted by January 2026.
The HMRC have not yet updated and published a guidance note but when they do, we will publish another blog.
The whole system is a radical change to the current system, but we are ready for it and we will be starting to change our systems from April 2022 to give our clients two years to prepare.