Making Tax Digital for Income Tax is coming in 2024
The government has recently announced that Making Tax Digital for Income Tax will come into force in 2024, a year later than the original deadline.
We take you through what Making Tax Digital for Income Tax is, how it will affect your business and what you can do to prepare.
What is Making Tax Digital for Income Tax?
Making Tax Digital for VAT is already in force now. So, if you’re affected by MTD already you’ll know what to expect.
For those of you who don’t, Making Tax Digital means that the way you submit your tax return is becoming fully digitalised.
If you’re affected by MTD for Income Tax, you’ll need to keep digital records using a compliant software that updates HMRC quarterly. It’s important to know that this won’t change the date when you need to pay your tax.
There will also be changes to the penalties for those of you who are affected by MTD for Income Tax in April 2024. If you’re not, then the new Income Tax penalties will affect you from April 2025.
Who is affected?
If you’re a business or a landlord with an annual income of over £10,000 then you will be required to join Making Tax Digital for Income Tax starting from April 2024.
General partnerships won’t need to join until the tax year starting in April 2025. It has not yet been announced when other types of partnerships will need to join in future.
If you’re already part of the MTD for Income Tax pilot then you won’t be affected by these changes, and you can continue in your pilot as planned.
How to prepare for MTD for Income Tax
For now, you don’t need to be using compatible software for Making Tax Digital. Closer to the deadline MTD for Income Tax solutions will become available, and you can start using them.
In the meantime, a good way to prepare is to get used to doing your accounting using an online software.
Another way to prepare is to get used to having an accounting routine. Set aside time to regularly record transactions and invoices, check your reports and make sure your accounting is up to date. This will make it easier to manage quarterly reporting instead of a yearly submission.
Find out more about how to get a great accounting routine here
Bokio is a simple way to do your accounting, invoicing and more online. Our software takes you through the process step by step, with time saving features like automated bank feeds, smart bookkeeping templates and integrated invoicing. If you need help with your accounting, you can invite your accountant or colleagues to work together in Bokio.