Making Tax Digital (MTD): the next stage

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From the start of the 2024/25 tax year, MTD will extend to those with gross business income and rental over £10,000. Find out what this could mean for you and how to be prepared.   

All VAT registered businesses with income over £85,000 are already required to complete tax accounts and reporting digitally. The next stages of MTD, for other areas of tax, are now going live.

It’s been confirmed that sole traders and landlords with gross annual business or property income above £10,000 will need to engage with the MTD process from 6 April 2024. This means they will be required to keep digital records of income and expenses and submit these quarterly to HMRC.

They must also submit a year-end statement at the end of the tax year, to include any accounting adjustments and tax reliefs previously reportable via a Self-Assessment tax return.

MTD for global assignees is still some way off given the complexity of varying tax rules in differing countries.  As the legislation progresses things will change and it is important that both inbound and outbound assignees are aware of the impending changes and the relevant reporting that will be required, particularly with regard to rental or self-employment income.

Our five top tips

  1. Start to get into good habits now

As MTD means an increased level of reporting compared to Self-Assessment (quarterly submissions rather than an annual one on 31 January), it’s worth moving towards digital records and bookkeeping sooner rather than later before this is made mandatory.

  1. Research software providers who can help

There are many providers on the market, but you will need to find the software that suits you and your business. Specialist software helps in the preparation of MTD submissions and keeping digital records of income and expenses.

  1. Beware the change in basis period rules

Under MTD, the Government intends to align sole trader business reporting to the 5 April tax year end. If you are not currently reporting on this basis, there will be a transition period to report income and expenses to a 5 April year end by 2024/25.

  1. Consider the wisdom of rent rises

For landlords who receive gross rental income of just under the £10,000 threshold, it may be worth considering the impact of any rise in rent charged. For example, the additional costs of meeting MTD requirements may outweigh the benefits of increased gross rent.

  1. Look at transferring properties into joint names

An important point to consider is that the £10,000 threshold is per landlord and not per property. So, it may suit you to transfer properties into joint names with your spouse or civil partner. This way, the gross rent will be split across two landlords.

If you would like further support on any of the tax-related issues covered in this article, please contact Stephen Kenny