Making Tax Digital – Is it time to go Digital?

Practical Accountancy with Allchurch & Co

Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.

HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world. Making Tax Digital is making fundamental changes to the way the tax system works.

If you want to discuss the steps to make your business finance processes more digital then please don’t hesitate to get in touch, we are happy to have an initial conversation to understand your business and your ambitions, with no obligation to use our services.

Making Tax Digital for VAT

  • VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) are now required to follow the Making Tax Digital rules by keeping digital records and using software to submit their VAT returns
  • If you are below the VAT threshold you can voluntarily join the Making Tax Digital service now
  • VAT-registered businesses with a taxable turnover below £85,000 will be required to follow Making Tax digital rules for their first return starting on or after April 2022

Making Tax Digital for Income Tax

  • Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2023. (One of the biggest changes being quarterly reporting!)

Making Tax Digital for Corporation Tax

  • The government has published a consultation on the future design of Making Tax Digital for Corporation Tax and welcomes views from companies and other organisations within the charge to Corporation Tax, agents, professional bodies and software developers
  • The government will provide businesses with an opportunity to take part in a pilot for Making Tax Digital for Corporation Tax and will not mandate its usage before 2026

Tax savings to consider as we enter a new tax year

Marriage Allowance

Allows you to transfer £1,260 of your Personal Allowance to your husband, wife or civil partner. This reduces their tax by up to £252 in the tax year (6 April to 5 April the next year). To benefit as a couple, you (as the lower earner) must normally have an income below your Personal Allowance – this is usually £12,570.

Working from home

You may be able to claim tax relief for additional household costs if you have to work at home on a regular basis, either for all or part of the week. This includes if you have to work from home because of coronavirus (COVID-19).

You cannot claim tax relief if you choose to work from home.

You can either claim tax relief on:

  • £6 a week from 6 April 2020 (for previous tax years the rate is £4 a week) – you will not need to keep evidence of your extra costs
  • the exact amount of extra costs you’ve incurred above the weekly amount – you’ll need evidence such as receipts, bills or contracts

You’ll get tax relief based on the rate at which you pay tax. For example, if you pay the 20% basic rate of tax and claim tax relief on £6 a week you would get £1.20 per week in tax relief (20% of £6).

Cleaning Uniforms and paying for work tools

You can claim tax relief on flat rate expenses if you’re employed by someone and you:

  • clean your work uniform
  • spend your own money on repairing or replacing equipment you need to do your job

If your employer pays all of your expenses you cannot claim any tax relief.

Please get in touch if you wish to discuss anything in this article further, we would be happy to set up a consultation.

Allchurch & Co – Chartered Accountants 07825 232218





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