Making tax digital: How does it affect you?
Isabella Callaghan, managing director of Number Crunchers, discusses how sole traders in the kitchen and bathroom industry can prepare for Making Tax Digital and why they should do it soon.
If you are a limited company or VAT registered, you will already be familiar with Making Tax Digital (MTD). However, if you are a self-employed sole trader working in the kitchen and bathroom industry with an annual income of over £10,000 you will soon need to start preparing for Making Tax Digital, which will come into place in April 2024.
I have been working with sole traders and companies in the kitchen and bathroom industry for over 26 years, so I have a strong respect for their skills and services, as well as understanding their everyday stresses when it comes to bookkeeping. As an accountant, I and my fellow accountants have now been tasked to bring these sole traders into the new tax system called MTD, which means Making
From April 6, 2024, all self-employed businesses and landlords with an annual business or property income above £10,000 will need to follow the rules for Making Tax Digital for Income Tax.
HMRC will require that a return is submitted quarterly, and that businesses will need to use Making Tax Digital compatible software to keep digital records.
At present a lot of sole traders think:
•That doesn’t apply to me – some sole traders are ignoring the emails, software advertisements, as they genuinely believe it’s not going to affect them.
•More costs – some sole traders are concerned that their accountancy bills or MTD compatible software packages are going to quadruple.
•2024 is ages away – some sole traders want to wait until April 2024 before thinking about Making Tax Digital.
Now let me dispel a few of those concerns:
•If you are a sole trader with an income above £10k – it means you! HMRC will require that you submit a return every quarter, as the name (Making Tax Digital) suggests this means digitally and to do that you will need MTD compatible software to keep the digital records.
•It doesn’t need to be daunting if you start preparing now. We have already transitioned many clients to MTD compatible software, and the majority now prefer the move to digital bookkeeping. I am not going to pretend that it wasn’t different for them at first, but we had the time to train them at no additional cost and they are now up and running and can’t believe how much time they are saving.
•There are various MTD compatible software packages available that you can use, such as Sage, Xero, FreeAgent and QuickBooks. Please undertake your research, as some are more affordable than others. Your accountant can also advise you on the most cost-effective option to suit your business needs.
•April 2024 seems a long way down the line, but it is only 18 months away and if you move to digital bookkeeping now, you have time to sort any niggles and training out. This will most definitely not be the case in 18 months’ time.
In conclusion, don’t wait until 2024 – talk to your accountant today.