Tax filing mistakes have cost the Exchequer £8.5 billion in 2018- 2019 alone.

In response, the government developed a 10-year plan to modernise the tax system. At its core, making tax digital aims to make tax administration more efficient and easier for taxpayers.

Both the self-employed and landlords are part of the third leg of a race that started in 2019.

What changes can you expect? When is MTD being introduced? All that we covered in this comprehensive guide.

What Is Making Tax Digital?

Making tax digital is a government initiative that promotes using compatible software to manage taxes with Her Majesty's Revenue and Customs (HMRC).  

In 2019, the government introduced making tax digital (MTD) for VAT-registered businesses with a threshold above £85 000. Later, in 2022 came the MTD regulations for businesses with a taxable threshold below £85 000.

MTD for the self-employed and landlords will be officially regulated in April 2024. And it targets those with an annual threshold of over £10 000.

MTD Guidelines for the Self-employed and Landlords

Under the MTD guidelines, the UK is looking to turn the HMRC system into the most advanced tax administration in the world. So no more paper filing or annual reporting. Rather specialized accounting software that makes it easy for businesses to report their income.

Here are several other changes coming for the landlords and self-employed taxpayers:

Frequency

MTD system brings more frequent reporting. Where businesses could file a self-assessment at the end of the year, MTD regulations require that reporting be made every quarter. 

End of Period Statement

Every 31 January, taxpayers must have also filed an End of Period statement (EOP). An EOP is a declaration certifying that the information submitted during the year is accurate.

Final Declaration

The final declaration is the last thing that will have to be submitted by the self-employed and landlords. It comes after the EOP, income declarations and can only be filed once the taxpayer has nothing else to declare to the HMRC.

The Best Software for Making Tax Digital

One thing is obvious; contractors, freelancers and landlords with an overall income of over £10 000 will need an accounting software to file taxes in the UK from 2024. 

But not every accounting software is compatible with the HMRC interface. Businesses will have to ensure that they partner with the right software. Or better yet, an accounting firm that will provide you with the best support on your compliance journey. Which is what you will find at The Numbersmith.

Xero

Xero is a premium accounting software for small businesses. With Xero, businesses have a range of features to help make them MTD compliant. From tax submissions to data reconciliation, Xero is the choice software for keeping records.

Quickbooks

Quickbooks will help you manage cash flow, tax submissions and payrolls. Developed in 1983, Quickbooks is a cloud-based accounting software that will help you with MTD compliance.

Ready for Making Tax Digital?

By April 6 2024, all the self-employed, be it contractors or freelancers etc. and landlords with an overall income of over £10 000 will be required to go digital. With a couple of years to go, you have time to prepare to ensure that your business is making tax digital ready.

At The Numbermmith you will not only be partnering with a team of Making Tax Digital accounting experts but a platinum partner with the best accounting software. This means we can offer you specialized services tailored to meet your business needs.

Contact us to hear how we can help make your business the best it could be.