Making Tax Digital – FAQs
Your questions answered
Making Tax Digital for Income Tax Self-Assessment.
Yes. Making Tax Digital for Income Tax applies to sole traders and general partnerships, which means that anyone who is self-employed but doesn’t operate through a limited company will have to sign up and use the new system.
If you’re a sole trader, self-employed, in partnership, or make income from property, and your income is over £10,000 per year before tax, then you will have to sign up for MTD for Income Tax when it is rolled out in 2024.
From April 2024 you will need to be able to capture your accounting transactions digitally using a HMRC approved software package that can link directly to HMRC for submission. For the very smallest of businesses with limited transactions the specialists at Folkes Worton.
Every three months, you’ll need to send a summary of your business income and expenses to HMRC. The specialists at Folkes Worton will help you remain compliant and will advise you as submission dates approach and support you when another is due.
Following each submission, you’ll then be able to see your year-to-date assessment of your tax liability based on the information you provide.
At the moment we envisage that there will be additional time costs when comparing the self assessment process to MTD ITSA and in addition there will be software compliance costs. It is likely that clients could see a 10% to 15% increase.
At Folkes Worton we are working directly with software providers to ensure that any efficiencies that can be gained to reduce time costs are taken together with any bulk discounts that which achieve which we will pass direct to clients.
It is a good idea to plan ahead and sign-up before the deadline, to make sure there is no chance of missing it!
HMRC is currently running a pilot scheme, so you can actually sign-up already if you are compliant or need time to familiarise yourself with the requirements ahead of the deadline. The pilot scheme is currently only open to sole traders with income from only one business.
