Only something to worry about if you do your own tax return. If you use an accountant they'll be digital.
Thats not true Simon by any measure. I submit my own accounts without an accountant via HMRC website, as i'd imagine many do here. I'm a sole trader, no employees. I use Aworka to monitor my jobs and accounts/expenses. As far as i am aware it does not have a facility to reconcile bank payments with invoices, nor has an interface to produce something that will satisfy HMRC need to keep and submit digital records. I may be wrong, but what i will do is email Chris @ Aworka to ask that very question.
If you use an accountant? Well they are as digital as me, and the next guy who submits like me..................... In practice, this is what accountants are sending out......... Its lengthy.............
Dear Client
MAKING TAX DIGITAL FOR INCOME TAX
As you may or may not be aware, HMRC have introduced their “making tax digital” regime (MTD). This requires businesses to keep digital records and submit information via compatible software. Currently this has only been required for VAT registered businesses submitting their VAT returns. However from 6 April 2024, all self employed businesses with annual turnover over £10K or tax payers with annual rental income over £10K will fall into MTD for income tax.
This requires tax payers them to report on their income and submit to HMRC quarterly with two further returns (end of period submission and final declaration). These submission cannot be done by paper and have to be completed via compatible software.
The main providers of this software are:
QuickBooks
Xero
Sage
But there are others available.
You can make these submissions yourself via the software.
We can also provide QuickBooks software for you at a discounted price to what is available online. We currently have licenses available for QuickBooks online pus for £10 plus VAT per month.
We will provide training for QuickBooks in the next few months for interested clients. We will also provide material to help starting to use QuickBooks and register for online training by QuickBooks themselves.
Youi will not be required to make your first submission to HMRC till after the first quarter ended 5 July 2024 and will be due by 5 August 2024 but please note that penalties may be issued for non-submission or late submissions.
If you are possibly interested in taking up the offer of the software or training in QuickBooks, please let Tom know at the office so we can book you place on our first session.
Kind regards
My mate who got that email pays £50 per month accountancy fees. He rung up and asked if he doesn't want to bother doing that himself, will they do it for him? He was told, yes they will......... they do not envisage much extra cost. But it will be 10 pence per transaction / invoice to process.
Well anyone can do their own maths and work out how many transactions you have for them to process. They did say its early days yet and they are not sure. That transaction cost would probably also incur VAT too.
A quick Google about showed me some free software that maybe applicable/appropriate for a sole /small trader like me, as i'm a mingebag.
Crunch:
https://www.crunch.co.uk/pricing#compare-packages-ST
Sunrise:
https://hprc.lendio.com/small-business-software/pricing/
Either way, 2024 seems like a long way off. But come then you'll need to hit the ground running. We've just over a year to get ready.
I've asked what windies are doing regarding MTD before and got very little response from the forum, probably because it's a future problem.
Personally, I use George, so I can easily get a total of cash sales for any given period (quarter).
My expenses are all done on an Excel spreadsheet as I use that to split expenses into business and private use. For example, my business self assessment tells me that 10% of my van's mileage falls under what HMRC classes as private use and hence not claimable against tax. So £100 of fuel means I claim £90 as a business expense.
I have different formulas set. My business self assessment is that the business element of my mobile phone bill is 50%.
At the moment, I'm in the process of setting my Expenses spreadsheet into 4 quarters, so I can report these by the quarter.
I've looked at the software available a while back and I noticed that Rhino has a free to use simple reporting software if you submit your tax return using the cash received accounting system. I do this anyway. What gets me is that we then have to pay £49.99 to submit the final declaration.
What concerns me is linking our bank deposits to payments received. What happens if I pay cash for fuel from the money I receive from customers? That's not going into the bank. But I can identify what amount a quarter are cash and cheque receipts and what amounts come via credit transfer using a George report.
Another concern is that as a small sole trader, I'm using my personal bank account. Ideally, they want us to have a separate business bank account. When I checked with Natwest (who I bank with) they wanted £80 a month for the business transactions I did then for a business account. Back then I banked cash every week, perhaps 6 cheques a month and a few outgoings. Since covid, I bank probably once every 3 months.
Currently, I do my tax return myself using the HMRC's website. You tick boxes for other sources of income and expenses. Bank interest and charity payments are a couple of examples. I don't know how those are reported under the new system.
