How to plan ahead
If you’re a sole trader already complying with MTD for VAT, you shouldn’t see much change in your record keeping when it comes to MTD for income tax. However, other sole traders and landlords should start planning for the transition now to ensure MTD compliance and to avoid any penalties. The best way to get started is to:
1. Ensure that you are keeping your income and expense records in a digital format
When you get paid in cash you should use software to record the transaction digitally in a spreadsheet or bookkeeping software. Also, avoid piling up stacks of receipts and instead start getting into the habit of scanning in and saving those travel or office expenses, ready for each quarterly submission. We recommend that you do this before the end of the current tax year so you are familiar with digital record keeping well ahead of the implementation of MTD for income tax.
2. Align your accounting periods if you have multiple trades
If you have multiple trades, or a trade and a rental property with different accounting periods you should look to align these to reduce your future reporting requirements under MTD for income tax. For example, if you have a sole trade with the year end 31 March and a rental property which you report on a UK tax year basis (to 6 April), you should look to change the accounting periods to the same end date to avoid the additional four quarterly submissions if your tax years are not aligned.
3. Join the HMRC MTD for income tax pilot
HMRC is currently running a very limited MTD for income tax pilot and learning from the implementation of MTD for VAT to help prepare for a full roll out. If you’re a UK resident sole trader with one business, or a landlord with UK property income, you are eligible for the pilot. If you have income from any other sources, you’re unable to join currently. By joining the pilot, you’ll benefit from first-hand experience with the new “real time” tax system and ensure you are ready ahead of it MTD for income tax being mandated for all. If you are interested in joining the pilot please get in touch below and we will add you to the waiting list. We are hoping to join the pilot later this year and there will be no additional costs for this service for existing clients.