Navigating Upcoming Tax Changes: MTD for Income Tax & Less Regulation

The landscape of tax and business regulations is changing, and at Powered Now, we understand the importance of staying ahead of the curve. If your 2023/24 Self-Assessment Tax Return shows income near or above £50,000, expect a letter from HMRC in April 2025, first up, we’re here to help.

From the impending rollout of Making Tax Digital for Income Tax (MTD IT) to significant shifts in company size thresholds, these changes will impact how you manage your business. This guide aims to demystify these updates, providing you with clear, actionable information to ensure you're prepared.

Making Tax Digital for Income Tax (MTD IT): A Simple Guide

Inspired by the government's push for a digitally advanced tax system, MTD IT is the next major step after MTD for VAT. It's designed to streamline tax administration, making it easier for taxpayers to get it right.

What is Changing?

• Instead of the traditional annual Self-Assessment tax return, affected individuals will submit quarterly updates of their income and expenses, followed by a final declaration.

Who Will Be Affected?

• April 2026: Self-employed individuals and landlords with total income (turnover, not profit) exceeding £50,000.
• April 2027: those with income exceeding £30,000.
• Individuals with income above 20,000 will be included before the end of this parliament (by 2029 at the latest).
• Partnerships will follow at a later, yet-to-be-announced date.

What You Need to Do:

1. If you are using Powered Now, relax: We are currently working on an update to support these changes, so you can simply use Powered Now for everything. No need to buy any expensive accounting software. If you already have accounting software, we should be able to work alongside that too.
2. Digital Record Keeping: Start keeping digital records of all business income and expenses. Powered Now can help with this, or you can use other compatible software.
3. Quarterly Updates: Submit summaries of your income and expenses to HMRC every three months. Deadlines: August 7th, November 7th, February 7th, and May 7th.
4. Final Declaration: Complete a final declaration at the end of the tax year, confirming the accuracy of your updates and adding any necessary adjustments.

HMRC Letters and Preparation:

• If your 2023/24 Self-Assessment Tax Return shows income near or above £50,000, expect a letter from HMRC in March or April 2025.
• Two types of letters will be sent: one for those expected to comply and another for those with turnover between £45,000 and £50,000.
• Keep an eye out for Powered Now emails, we are going to be getting in touch to help you through these changes.
• Remember, signing up to MTD IT is not automatic.

Less regulation from company and LLP Size changes

From April 6, 2025, new regulations will increase company and LLP size thresholds, hopefully reducing some regulatory hassle:

• The new thresholds are based on turnover, balance sheet total, and employee numbers.
• This could lead to exemptions from audit requirements and simpler accounting procedures.
• A transitional provision will be in place.

Other Key Updates

• HMRC Abandons RTI Hours Reporting: HMRC has scrapped plans to require detailed employee hours reporting through RTI, reducing administrative burdens.
• Employment Allowance Increase: From April 2025, the allowance will increase to £10,500, and the £100,000 NIC contributions threshold will be removed, allowing more employers to claim.
• New Tax Return Requirements: Sole traders starting or ceasing trade and directors of close companies will face new mandatory reporting requirements from April 5, 2025.
• HMRC Customer Service: Gibson Whitter contributed to a study on improving HMRC's customer service, highlighting ongoing efforts to address client frustrations.

Powered Now: Your Partner in Navigating These Changes

We understand that these changes can be daunting. That's why Powered Now is committed to providing you with easy to use software when these changes arrive. If you have any questions please just get in contact with us!

Disclaimer

• The information provided in this article is for general guidance only and should not be considered professional tax advice. Always consult with a qualified accountant or tax advisor for personalized guidance.