Making Tax Digital (MTD) & Self-Employed Basis Period Reform

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All VAT-registered businesses are now within MTD for VAT and VAT-registered businesses with turnover below the VAT registration threshold of £85,000 which have not already signed up to MTD for VAT voluntarily must comply with the requirements from the start of their first VAT accounting period beginning on or after 1 April 2022. Under MTD, records must be maintained digitally and VAT returns must be filed digitally using MTD-compatible software.

If you are new to MTD for VAT, we can help you meet your obligations.

Basis period reform

MTD for Income Tax will apply to businesses and landlords in relation to their trading and property income where their gross income from these sources is more than £10,000 for the tax year from 6 April 2024. Ahead of its introduction, the rules on basis periods are being reformed.

Currently, the current year basis applies to unincorporated businesses under which once the business is up and running it is taxed on the profits for the accounting period that ends in the tax year (so, for example, the profits for the year to 31 December 2022 are taxed in 2022/23). Different rules apply in the opening and closing years of the business.

However, from 2024/25, profits will be taxed on a tax-year basis, so that the profits for 2024/25 will be those for the period from 6 April 2024 to 5 April 2025. Where the accounting period is different to the tax year, apportionment will be needed to arrive at the profits for the tax year.

To move from the current year basis to the tax year basis, 2023/24 will be a transitional year.

Related news

Don’t get caught out by scam contacts posing as HMRC! HMRC have updated their guidance with examples of related phishing emails, suspicious phone calls and texts to help individuals identify when they are being scammed. Follow the link below. https://www.gov.uk/government/publications/phishing-and-bogus-emails-hm-revenue-and-customs-examples/phishing-emails-and-bogus-contact-hm-revenue-and-customs-examples

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2024-25 Tax Rates

Please visit our tax rates guide to check the tax rates you are using from the 6 April 2024 are the correct ones.

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