Is Your Business Ready for MTD for Income Tax? How We Can Help You Stay Compliant?

Is Your Business Ready for MTD for Income Tax? How We Can Help You Stay Compliant?

If you’re a business owner, self-employed individual, or landlord in the UK, you’ve probably heard of Making Tax Digital (MTD). Initially introduced for VAT, MTD is now being extended to Income Tax, meaning that the way you report your taxes is about to change. With the deadline fast approaching, it’s vital to ensure that your business is prepared.

At Sigma Accounting, we specialise in helping businesses of all sizes navigate the complexities of MTD for Income Tax. In this blog, we’ll explain what MTD for Income Tax is, how it affects you, and why partnering with an experienced accountant can ensure your business stays compliant and ahead of the curve.

What is MTD for Income Tax?

Making Tax Digital for Income Tax (MTD ITSA) is a government initiative designed to modernise the UK tax system by moving businesses, self-employed individuals, and landlords from traditional paper-based tax reporting to digital, real-time tax management. This means that rather than submitting one annual tax return, businesses will be required to submit quarterly updates on their income and expenses to HMRC, using MTD-compliant software.

The goal is to simplify the tax process, reduce errors, and improve efficiency. For many, this change may seem overwhelming, but with the right guidance, it can be an opportunity to streamline your business operations.

Who Needs to Comply with MTD for Income Tax?

Initially, MTD for Income Tax will affect:

• Self-employed individuals (e.g., freelancers, contractors, and sole traders)
• Landlords who earn income from property
• Partnerships with self-employed individuals

The rules apply to anyone with income over £10,000 per year from self-employment or property. This includes not just business owners but also landlords with rental income. Over time, the threshold may be lowered, meaning that more people will be required to comply.

If you fall within these categories, it’s essential to understand the key requirements and ensure your business is prepared well in advance.

Key Changes Under MTD for Income Tax

1. Quarterly Reporting

Instead of filing an annual self-assessment return, businesses will now need to submit updates to HMRC every three months. These updates will include details about your income, expenses, and other relevant information. Quarterly reporting means you’ll have more frequent opportunities to correct mistakes, ensuring that you’re always up-to-date with your tax obligations.

2. Digital Record Keeping

Under MTD for Income Tax, you will need to keep digital records of your business income and expenses. This means transitioning from paper receipts and spreadsheets to a digital format. You’ll also need to store these records in software that’s compatible with MTD.

3. End of Year Declaration

At the end of the year, you’ll still need to submit an annual summary of your income and expenses. This declaration will reconcile your quarterly submissions and ensure that any final adjustments are made before your tax bill is issued.

4. MTD-Compliant Software

To submit your quarterly updates and keep digital records, you’ll need to use accounting software that is compatible with MTD. Popular options include QuickBooks, Xero, and FreeAgent. These tools can help you track your income and expenses in real-time, automatically calculate your tax liabilities, and submit your updates directly to HMRC.

How We Can Help You Prepare for MTD

At Sigma Accounting, we understand that the transition to MTD for Income Tax can feel overwhelming. The good news is, we’re here to make the process as seamless as possible.

1. Expert Guidance on MTD Compliance

Our team of accountants specializes in MTD for Income Tax and can guide you through the entire process. From selecting the right software to ensuring your records are compliant, we’ll help you stay on track with your quarterly submissions and meet all deadlines.

2. Software Implementation and Support

We’ll help you choose the right MTD-compliant software based on your business needs. We can also set it up for you and provide ongoing support to ensure that you’re using it correctly. This means you won’t need to worry about manually calculating tax or submitting incorrect returns.

3. Regular Financial Check-ups

With quarterly updates required under MTD, it’s important to stay on top of your financial records. Our team will work with you regularly to ensure that your income, expenses, and tax calculations are accurate, so you don’t run into any issues at the end of the year.

4. Peace of Mind

By working with us, you can rest easy knowing that your tax affairs are in safe hands. We’ll ensure that all of your records are up-to-date, accurate, and fully compliant with MTD for Income Tax. This reduces the risk of errors, penalties, and stress down the line.

Why Choose Sigma Acounting?

• Specialist Knowledge: Our team has extensive experience with MTD and can help you navigate the complexities of this new tax regime.
• Tailored Support: We understand that every business is unique, and we offer personalized advice and solutions to fit your specific needs.
• Efficient Service: We use the latest technology to streamline your tax reporting, saving you time and effort.
• Ongoing Compliance: MTD is a long-term change, and we’ll be there to support you throughout the entire journey.

MTD for Income Tax is a significant change, but it doesn’t have to be a burden. At Sigma Accounting, we’re here to help you transition smoothly into this new tax system, ensuring that you stay compliant, reduce errors, and avoid penalties.

If you’re ready to take control of your tax obligations, simplify your bookkeeping, and stay ahead of the curve with MTD for Income Tax, get in touch with us today. Our team of experts will guide you every step of the way, ensuring your business thrives in the digital age.