Making Tax Digital for income tax is coming (eventually)… preparation should start now

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  Posted by: Dental Design      15th December 2021

The deadline for Making Tax Digital for income tax self-assessment (MTD ITSA) has been extended by one year, moving from 6 April 2023 to 2024.

From then, over 4 million taxpayers, including landlords, sole traders, and partnerships, will be required to join MTD ITSA for their income tax obligations, if they have business and/or property income over £10,000. Most sole trader/partnership dental practice owners, principal and associate dentists and other professionals will be affected.

The last two years have reminded us that life is full of surprises, so getting organised for what we do know is going to happen, eventually, is eminently sensible in the current climate!

Background

MTD ITSA is a key part of HMRC’s ongoing plans to transform tax administration in the UK making it one of the most digitally advanced systems in the world. Up-to-date digital records in real time will reduce the risk of errors and will help businesses and individuals manage their cash flow better, HMRC says.

MTD has been piloted and, since 2019, it has been requirement for VAT-registered businesses who have a taxable turnover above the VAT threshold; from April 2022, VAT-registered businesses with turnover below the threshold will also be part of the system.

If the government is so confident in it, why the delay for MTD ITSA? Well, it claims to be a response to the challenges faced by businesses during the pandemic and to feedback from stakeholders.

What do to now

Making necessary changes now will save you a considerable amount of future stress, even with the year-long pushback. When MTD ITSA applies to you, regardless of when your current accounting period ends, you’ll need to record income and expenditure digitally. A quarterly summary of both will have to be sent to HMRC and a final annual declaration will replace the self-assessment tax return. A late filing penalty will not apply until four quarterly submissions are late.

You will have to move to Cloud-based bookkeeping if you are still on desktop or paper record keeping. This will not only get you ready for digital record keeping ahead of the deadline, but there are Cloud-based accounting solutions that could transform your business finances. They offer safe, secure storage for key data, which will be instantly accessible (and shareable) from multiple devices.

When the time comes, you will need to use MTD enabled software to submit your quarterly updates, and currently there are less than 10 providers of this. The government says it has no plans to fund the cost of compliance. With the extra time to get organised, see this as an opportunity to improve efficiency by streamlining workflows.

Real-time record keeping that gives you an up-to-date picture of your business and personal finance could support all kinds of future planning. Whether it’s planning for retirement, buying a practice, or growing the business you have, accurate financial data will allow you make pragmatic decisions.

There is a wealth of information about MTD that can be accessed on the government’s website that should answer most of your questions. But for all tax planning, general accounting, and business development advice, give Figurit a call. As specialist dental accountants, we have supported clients through changing and challenging times. We understand the demands of dentistry and combine this with our knowledge of the principles of good accounting to provide a tailored, quality service.

Get ready to embrace change! Some are scheduled – and the government has been committed to MTD for a long time – and some will happen with less notice, so being open to new ways of working, and organised will mean you’re ready for anything.

Michael is a specialist Dental Accountant and Tax Advisor with strong technical and communication skills.

Completing his training with international accounting firm Deloitte he then became a founding Partner at

Figurit (formally Lansdell & Rose)

Michael combines a strategic approach with high attention to detail and is focused on saving his clients tax

over both the short and long term, using robust tax-saving vehicles and tax efficient business structuring.

T: 020 7376 9333 E: info@figurit.com

 

            For more information, please visit https://figurit.com
or call Figurit (formerly known as Lansdell & Rose) on 020 7376 9333.

 

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