Making tax digital changes are coming for small business and buy-to-let owners, and if you think you only have a small business or property portfolio, so the rules will not affect you, please read on.
You may be (not so pleasantly) surprised.
As a business owner you will be used to making submissions to HMRC, whether you do that yourself or through an accountant. But the rules are changing, and these may well affect your business and even your nice little property rental income.
VAT changes from April 2022
The next change to MTD comes into effect on 1st April 2022. Currently all VAT registered business whose annual turnover is in excess of £85,000 must submit their returns under the MTD rules.
This means they must use compatible software to make their submissions. For example, they cannot log-in to the HMRC website and just type the figures in.
From April 2022 these rules will apply to all VAT registered businesses, regardless of turnover level. So, if you are VAT registered and do not currently use MTD compatible software, you will need to change how you keep your records.
Alternatively, you may consider deregistering for vat. But speak to an accountant first, deregistration could be bad for your business.
Income Tax changes from April 2024
The big change that will affect a large number of sole trader and small partnership businesses, comes into effect from April 2024. And this will also matter for owners of buy-to-let properties.
From April 2024 any business, including property owners, with an annual turnover of over £10,000 will need to comply with new rules.
Think about that. Any owner of buy-to-let properties whose monthly rental income (note income, not profit) is over £833 will need to follow the new rules. For us, here in the South-East, that is going to affect the vast majority of portfolio owners, even if they only rent out 1 property.4
What will you need to do?
Firstly, the changes for business owners take effect from the start of the first financial year that commences after 5th April 2024. For example, if your year-end is 30th September, you will need to follow the new rules from 1st October 2024.
As property income always follows the tax year, the change will commence from 6th April 2024.
From the point you need to start, you will be required to submit a return to HMRC every 3 months. In addition, a final submission will be required each year. All these returns must be done through MTD compliant software.
There will be penalties for non-compliance, including for late submissions.
More stress – more cost!
There is no doubt that these changes place an extra burden on small business and property owners. And there are likely to be extra costs involved too, with digitally compliant software being a necessity.
Bookkeeping will need to be regular and accurate. This may mean learning how to use the software as well then keeping it all up to date.
Is this a burden you could without?
How can I help?
I am always looking for solutions to help my clients keep their costs and their stress levels as low as possible and I am aware that software costs alone will impact the small businesses, as well as the need to be able to use the software in the first place.
By using ‘multi-client’ software I can spread the cost amongst a number of clients, keeping your additional costs to a minimum.
And, just as importantly, I can take the stress away from you, by keeping the records and making the submissions for you. You will know that returns will be made accurately and on time – no fines, no stress!
If you would like to discuss your options, please book a complimentary call with me. I will be happy to help.