Making Tax Digital for Sole Traders and even accidental landlords

If you are a Sole Trader, or rent a single property, and your income is greater than £10,000, will need to follow the rules for Making Tax Digital from the next accounting period starting after 6 April 2023.

This is a new announcement that was made during the COVID-19 period.

Making Tax Digital is the Government’s scheme to help people file accurate and timely tax returns, for both businesses and individuals, and requires quarterly digital reporting.

As with MTD for VAT, which has been in place for over a year, businesses and landlords will need to send a quarterly summary of their business income and expenses to HMRC using MTD-compatible software. There aren’t many yet.

In response they will receive an estimated tax calculation based on the information provided to help them budget for their tax. At the end of the year, they can add any non-business information, and finalise their tax affairs, again using MTD-compatible software. This replaces the need for a Self Assessment tax return.

Unlike VAT, there is not a requirement to pay quarterly, and the deadlines for finalising tax affairs and making payments are not changing.

We strongly recommend that sole traders and landlords who will be affected by this introduction sign up early, so that they can iron out any hiccups in their systems, and get into good habits, before it becomes compulsory.

Please get in touch if you need any help with this.