Making Tax Digital for Income Tax Self-Assessment – Record Keeping Rules
HMRC has published regulations for the record-keeping requirements for Making Tax Digital for Income Tax Self-Assessment, which requires some planning for those affected in the year ahead.
Starting in 2023/24, if you receive income greater than £10,000 per year from self-employment or rental income from land or buildings you’ll be required to make quarterly online reports of your business/rental income and outgoings, plus an annual summary. The first making tax digital for income tax self-assessment report will be for the quarter ending 5 July 2024, however you must have digital record keeping systems in place earlier.
What are the record keeping rules?
Under the new rules you’ll need HMRC-approved software to keep your day-to-day business/rental income and expenses records to collate your data and make the making tax digital reports for HMRC. HMRC’s draft regulations were published 1 July 2022 and set out format and type of information needed.
Your reports must summarise income and outgoings from your records into the categories currently used for your annual self-assessment tax return. One difference is that you won’t be required to make adjustments for non-tax-deductible items on the quarterly reports. These will be required on the annual summary report only.
Retail businesses will be able to make a special election to exclude certain information from their reports, such as erroneously recorded sales. Reporting will be more straightforward using HMRC- approved software as the income and expenses categories will already be set up. Regulations confirm quarterly reports plus an annual summary of income and outgoings will be required in a similar format as the current self-assessment return.
At LHP we use a number of making tax digital approved cloud accounting packages and apps that are fit for making tax digital purposes.
Xero is a great fit for most income tax self-assessment businesses and it will simplify your finances creating automation (time saving), insights (business planning) and scalability (ability to scale up is easier) benefits. We are an award-winning Xero Platinum Partner, so you are in safe hands in making the switch.
It is advisable you start planning now for these changes to avoid potential penalties and headaches in the transition to making tax digital.
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At LHP, we’re at the cutting edge of cloud accounting with a team of 70 staff across offices in South Wales and we promise to make the transition as seamless as possible to cloud accounts.
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