Tag Archives: MTD

Making Tax Digital: New Timetable

HMRC have announced significant changes to the timetable for the implementation of Making Tax Digital. We have previously written about HMRC‘s original plans for the implementation of Making Tax Digital, which would have come into effect from April 2018 for a number of businesses and landlords with gross income exceeding the VAT threshold (currently £85,000), and April 2019 for those below the threshold – however these timescales have now been relaxed.

Following HMRC’s newly reformed timetable, only VAT Registered businesses will be required to keep digital records from April 2019 – and only for VAT reporting purposes. The previous requirements for the reporting of other taxes quarterly to HMRC will not come into effect until at least 2020. This means businesses and landlords with turnovers below the VAT threshold will have at least 2 years before having to adopt a new digital system.

While the Government and HMRC are wholly supportive of MTD and the need to move to a more modern and streamlined system for the reporting of businesses tax affairs this is a significant slackening in the more imminent timescales that were previously expected. These changes have been well received by businesses and software providers alike who both recognise that more time is required to be able to make a comfortable transition to a new digital system of working.

 

 

Self-employment Business start-ups – FAQ

Self Employment FAQ

Starting-up in business, becoming self-employed, can be a bit of a daunting process, especially if you are not sure of some of the steps you need to go through. There are a few ‘hoops’ you need to jump through so we have put together a few basic pointers for those who are thinking of making that move in self-employment.

We can help you at every step of the way, so please feel free to contact us if there is anything you would like further information on or help with.

  1. Do I need to tell HMRC?
    • You will need to register as self-employed with HMRC and the easiest way to do this is online at gov.uk. Tell them as soon as possible after your self-employment begins.
  2. What will they ask me?
    • Your National Insurance number, address, date of birth and details of the business including nature of the business, date it began trading and your business address. If you have previously registered as self-employed you would have had a 10 digit unique taxpayer reference number. They will ask for this if you have it.
  3. Do I need to register for VAT?
    • You only need to register for VAT when your sales exceed £83,000 in a rolling 12 month period. However, you may wish to voluntarily register to enable you to claim back the input VAT on your expenses. This does mean you have to charge output VAT on your sales so it’s only advisable to voluntarily register if this will not affect your competitiveness e.g. if your customers are VAT registered and can reclaim the VAT you charge them.

Don’t forget that if you become VAT Registered you will need to file VAT Returns online with H M Revenue & Customs. You will need to create a Government Gateway account and register to file VAT Returns online. Make sure you allow enough time for this process before your first VAT Return becomes due!

  1. Do I pay myself a salary?
    • No, the money you draw from your business is not classed as a salary and is not a business expense. You do not pay tax on the money you draw from the business, only on the business profits. You can of course employ other people and pay them a salary which is a business expense.
  2. When do I pay tax?
    • Your first tax return will run from the day you start self-employment up to the following 5 April. Any tax will be due on the 31 January following that e.g. if you start self-employment on 1 June 2016, your first tax return will run to 5 April 2017 and if you have made a taxable profit, you will pay tax on 31 January 2018.
  3. Do I need to register for national insurance?
    • When you register as self-employed you will automatically be registered to pay national insurance. If your income is high enough, you will pay national insurance at the same time as any income tax.
  4. What records should I keep?
    • You need to keep records of your business income and expenditure. This will include bank statements, sales invoices and purchase invoices, details of the entries on your VAT Return and payroll records if you employ people. Keep records for at least 5 years from the 31 January following the tax year e.g. you must keep your records for the year ended 5 April 2016 at least until 31 January 2022.
  5. What happens once I’ve registered as self-employed?
    • HMRC will issue you with a unique taxpayer reference number and send you a notice to complete a tax return. You will need to enter on this tax return all your business income and expenditure to calculate your taxable profit and any tax that may be due. The tax return needs to be filed by the 31 January following the tax year end date (e.g. tax returns for the year ended 5 April 2016 are due to be filed by 31 January 2017).
  6. Aren’t things changing soon?
    • Yes! Over the next few years the Government’s plans to ‘make tax digital’ (MTD) will be rolled out and, depending on the size of your business, you may have simpler rules to follow for reporting your income and expenditure. You will also have to report more regularly, probably 4 times a year. More details will follow as they come through!