Did you know that a major tax change is on the way for 4.2 million self-assessment taxpayers, which will affect how you share your income figures with HM Revenue and Customs (HMRC)? Although this won’t come into force for a while, it’s best to be aware of the changes so you can be prepared in advance.
So far, the government’s initiative to modernise the tax system in the UK, known as MTD, has only applied to VAT reporting, but from 6 April 2024 it will be rolled out for Income Tax returns as well.
Who will be affected?
From this date, taxpayers with profits (before the deduction of allowable expenses) from business or property, totalling over £10,000 a year, will be affected. All UK residents who are registered for self-assessment before 6 April 2023 and who also meet the income threshold, will need to sign up and declare both UK and foreign earnings. However, if you live abroad, you only need to use MTD to declare your UK income. If you start earning income as a sole trader or landlord on or after 6 April 2023 you won’t have to join the scheme until you have filed your first self-assessment tax return.
What will be different?
The current self-assessment system, which involves submitting an online or paper form to HMRC annually, will be replaced by MTD. Instead, you will need to file quarterly reports which show business trading and property income and outgoings for that quarter. These quarterly reports are updates, not tax returns – you will still need to send a final annual return to HMRC by 31 January each year. If you pay on account, the deadlines will still be 31 January and 31 July.
Sensible financial planning can help to reduce the amount of tax you pay and safeguard your wealth for the future. We can help – please get in touch.
Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from taxation, are subject to change. The Financial Conduct Authority does not regulate tax planning.