HMRC has confirmed the mandation dates for making tax digital for income tax self assessment (MTD SA) as announced in the Autumn Statement 2023.

From April 2026, taxpayers subject to income tax on their trade, profession, property income or business and who have income above £50,000 will be required to keep their accounting records electronically (either using suitable software or on a spreadsheet) and file quarterly update returns to HMRC with details of their income and expenditure together with any other information that HMRC specifies.

The mandation date for self-employed taxpayers and landlords with income between £30,000 and £50,000 is April 2027.  There are currently no plans for MTD SA to be implemented for taxpayers with income below £30,000.

HMRC has also published an update notice announcing that quarterly updates will be cumulative. This will allow errors in one quarter’s reporting to be updated in the following quarter, removing the need to resubmit previous quarters.

Taxpayers who file self assessment tax returns with income above £50,000 need to prepare for MTD SA now. I have been preparing for MTD and can advise you on the best options for your business. 

When the current Prime Minister was Chancellor he announced an increase in the main rate of corporation tax to 25% to apply to profits above £250,000 from 1 April 2023. Under the previous administration this decision was reversed but the 25% rate will now apply next year.
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Companies with profits up to £50,000 per year will continue to pay corporation tax at the small profits rate of 19%. A company with total profits between £50,000 and £250,000 will pay 19% on the first £50,000 and a marginal rate of 26.5% on the rest.

​The VAT registration threshold has already been frozen at £85,000 since April 2017 and it will now be fixed at that level until April 2026. The Chancellor made the point that the UK's VAT registration threshold is more than twice as high as the average in OECD and EU countries so be prepared for this threshold to be cut in the future.

The VAT threshold freeze will drag many more businesses into compulsory VAT registration if they increase their prices with inflation which is now running at over 11%. There have been some teething problems with the new VAT registration process and it can take many weeks to receive a new VAT number. You need to act quickly to register for VAT once your turnover for the previous 12 months exceeds £85,000 or it is expected to exceed that level in the next 30 days. There are significant penalties for late registration.

Once a business is registered for VAT it must keep digital records and submit VAT returns using making tax digital (MTD) compatible software unless the business owner can show that they are digitally excluded.

​I can help you with VAT registration and to comply with MTD.

Last year the Chancellor Rishi Sunak proposed increasing corporation tax rates such that companies with annual profits of over £250,000 would pay tax at 25%. Those with annual profits of less than £50,000 would continue to pay tax at 19% but a marginal tax rate of around 26.5% would apply on profits between £50,000 and £250,000.

The new Chancellor Kwasi Kwarteng has decided to keep the main rate of corporation tax at 19% at all profit levels. This will certainly keep corporation tax calculations simple and benefit profitable companies with higher profits.

Companies can currently claim a super deduction of 130% of the cost of new equipment purchased before April 2023. This deduction is likely to be modified or scrapped as it was introduced to encourage companies to invest before the corporation tax rate increased to 25%.  Instead businesses will be encouraged to claim under the annual investment allowance (AIA) which gives 100% relief for the cost of any qualifying equipment whether it was purchased new or second hand. The AIA can cover purchases totalling up to £1m per year and this cap will now be kept at that level indefinitely.

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There are now almost 10 million people who work from home and can benefit from the tax-free allowance of £6 per week (£26 per month) which their employer may choose to pay.

Employers can reimburse larger amounts to home-based employees if the employees can prove that their increased variable costs from working at home, including heating, exceed £6 per week.

If you do not receive a homeworking allowance and you are required to work at home by your employer, you can claim a tax deduction of £6 per week from HMRC. However you must have a homeworking agreement in place with your employer which sets out the conditions under which you work from home.

Where your extra costs of working at home are higher than £6 per week you can claim a deduction from HMRC for the actual additional costs. With electricity and gas bills climbing, the cost of heating a room to work in may well exceed £6 per week. HMRC may ask to see proof of those costs so keep the bills as evidence.

You can claim the homeworking deduction on your self-assessment tax return or by using the online form P87. Where a similar claim has been made in an earlier year you can renew that claim by phoning HMRC.
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I can help you calculate the additional costs of working at home.

The making tax digital (MTD) rules currently only apply for businesses that submit VAT returns. Those traders need to keep their VAT records in a digital format and transmit their VAT return data directly from their digital records to HMRC using MTD-compatible software.

From 6 April 2024 similar MTD rules will apply to most individual traders and landlords who will need to keep digital business records and send digital summaries of their business income and expenses to HMRC every quarter.  If your gross trading and/or property income is more than £10,000 in the current tax year (2022-23) you will need to submit quarterly MTD updates plus an annual end of period statement and an annual finalisation statement which replaces your tax return. All of these reports must be submitted to HMRC online using MTD-compatible software, not on paper.
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HMRC will tell you early in 2024 whether you need to comply with MTD for income tax but it is best to start preparing your business now.

The rates for national insurance contributions (NIC) increased by 1.25 percentage points for everyone on 6 April 2022. From 6 July the NIC starting threshold will rise to £12,570 per year (£1,048 per month) for employees. This means that some lower paid employees will have more Class 1 NIC deducted from their pay from April to June 2022 but may pay no NIC from July 2022 onwards.

The tax payable on dividends is set to rise from 7.5% to 8.75% for basic rate taxpayers from 6.4.22. Higher rate taxpayers will pay 33.75% on dividends and additional rate taxpayers must budget for dividend tax of 39.35%. These rates will apply to all dividends taken from all companies where the total dividend income exceeds the dividend allowance (this has been held at £2,000 for 2022-23).

In the March 2021 Budget the Chancellor announced a super-deduction scheme that provides a 130% deduction for the cost of new plant or equipment if it is purchased by a company before 1.4.23. Expenditure on other new assets such as fixtures and integral features in buildings can also qualify for a 50% first year deduction if purchased before 1.4.23.
There are two major restrictions to these attractive investment reliefs:

• the assets must be purchased new (not second hand); and
• the super-deductions can only be claimed by companies.