Tag Archive for HMRC

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9 myths about Making Tax Digital busted

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By Henry Williams on Small Business UK – Advice and Ideas for UK Small Businesses and SMEs

Put simply, MTD is the government initiative to digitise the tax system and is being introduced in multiple stages over the next few years. HMRC hopes the new system will be fairer and more efficient and make it easier for businesses and individuals to get their taxes right.

Since April 2022, MTD for VAT has applied to all VAT-registered businesses. And as of April 2026, MTD for Income Tax will be phased in, with those earning over £50,000 from self-employment and/or property in the 24/25 tax year the first to be mandated. Initially due to come into effect in 2024, it was delayed due to the cost of living crisis to relieve additional pressure from small business owners.

In July 2025, HMRC announced that it has scrapped plans for MTD for Corporation Tax. Instead, it will renew its internal systems for Corporation Tax ahead of future improvements.

In this article, we’re aiming to clear up any remaining confusion by busting nine common MTD myths. 

1. You’ll pay more tax with MTD

Provided you’ve been doing your tax returns correctly, you shouldn’t be paying any more or less tax than

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What is the VAT threshold?

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By Tim Adler on Small Business UK – Advice and Ideas for UK Small Businesses and SMEs

The VAT threshold is the volume of annual turnover at which businesses are required to register for value-added tax (VAT).

Since April 2024, the UK VAT registration threshold has been £90,000.

VAT thresholds for previous years are as follows:

 

2014–2015 – £81,000

2015–2016 – £82,000

2016–2018 – £83,000

2019-2024 – £85,000

Since 1 April 2024 – £90,000

Once your business’s turnover reaches the VAT threshold, you have 30 days to register for VAT with HMRC. When this process is complete, your business has extra responsibilities including:

 

Charging VAT on your products or services

Paying VAT on the goods or services supplied by your vendors

Submitting your VAT return to HMRC every quarter (unless you opt into the Annual Accounting Scheme*) and maintaining a VAT account and records using Making Tax Digital (MTD)-compatible software

*Most VAT-registered businesses file quarterly VAT Returns (some monthly). If you opt into the Annual Accounting Scheme, you file one return per year with instalments. All VAT-registered businesses must keep digital records and file via MTD-compatible software

VAT registration

Registering for VAT is a legal requirement for businesses that exceed this threshold, and the threshold is reviewed regularly by HMRC.

You need to register for VAT

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Reprieve for self-employed having to report tax quarterly

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By Timothy Adler on Small Business – Advice and Ideas for UK Small Businesses and SMEs

Millions of self-employed will not have to start reporting their tax income quarterly to the taxman from April 2023 as planned.

Bowing to pressure, ministers have postponed overhauling personal tax for the self-employed for another year, in what has been called the biggest shakeup in 25 years.

Making Tax Digital was scheduled to make 4.3m self-employed and small business owners keep digital records and report their income to HMRC every quarter rather than annually from April 2023.

Instead, the measures will now come into place in April 2024, the Government announced on Thursday.

Self-employed tax burden

Ministers have bowed to pressure after complaints that rolling out Making Tax Digital to any self-employed person earning over £10,000 a year would be another administrative burden coming on top of coronavirus and the shaky recovery.

“The government recognises the challenges faced by many UK businesses and their representatives as the country emerges from the pandemic over the past year,” Lucy Frazer, newly appointed financial secretary to the Treasury, said in a written ministerial statement.

HMRC is pushing for the self-employed to complete their tax returns every quarter to reduce the number of inaccuracies – either

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Hot Business News Today

Reprieve for self-employed having to report tax quarterly

by  •  • 0 Comments

By Timothy Adler on Small Business – Advice and Ideas for UK Small Businesses and SMEs

Millions of self-employed will not have to start reporting their tax income quarterly to the taxman from April 2023 as planned.

Bowing to pressure, ministers have postponed overhauling personal tax for the self-employed for another year, in what has been called the biggest shakeup in 25 years.

Making Tax Digital was scheduled to make 4.3m self-employed and small business owners keep digital records and report their income to HMRC every quarter rather than annually from April 2023.

Instead, the measures will now come into place in April 2024, the Government announced on Thursday.

Self-employed tax burden

Ministers have bowed to pressure after complaints that rolling out Making Tax Digital to any self-employed person earning over £10,000 a year would be another administrative burden coming on top of coronavirus and the shaky recovery.

“The government recognises the challenges faced by many UK businesses and their representatives as the country emerges from the pandemic over the past year,” Lucy Frazer, newly appointed financial secretary to the Treasury, said in a written ministerial statement.

HMRC is pushing for the self-employed to complete their tax returns every quarter to reduce the number of inaccuracies – either

Read more...

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Taxman could claw back up to 10% of furlough cash

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By Timothy Adler on Small Business – Advice and Ideas for UK Small Businesses and SMEs

The taxman could claw back up to 10 per cent of all furlough cash from small businesses unaware they have overclaimed.

HMRC and the National Audit Office estimate between 5 per cent and 10 per cent of the total furlough money claimed could represent overclaims.

The Government is due to have spent over £70bn on furlough once the scheme ends on 30 September, nearly double the total UK defence spend in 2019/19.

>See also: This change to the furlough scheme could lead to more costly redundancies

At its peak 8.9m people were on furlough; the latest figure is 1.9m.

Nigel Morris, employment tax director at MHA, says innocent errors and incorrect claims will be pursued for many years by HMRC. He advises small businesses check their claims in detail, now that furlough is winding down. They should repay any overclaims through the Government’s own website before HMRC hits them with interest and penalties.

The most common administrative slip-up made by companies has been forgetting to work out claims for flexible furlough on calendar days (365 per annum) and have instead used working days (260 per annum), which they might use for

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Am I eligible for capital allowance?

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By Toby Cotton on Small Business – Advice and Ideas for UK Small Businesses and SMEs
Capital allowances are available on qualifying capital expenditure incurred on the provision of certain assets used in a company or individual’s trade. Not all assets qualify for a capital allowance and the rate of relief will vary. The allowances are deducted from trading profits effectively reducing the tax payable. This would be the income tax for a sole trader or partnership and corporation tax for a company.
In most cases, items purchased which are allocated as “plant and machinery” would achieve 100 per cent relief via the Annual Investment Allowance (AIA). The current AIA limit is £1,000,000 to the 31 December 2021 and then £200,000 from the 1 January 2022.
HMRC is generous in what it considers qualifying expenditure and includes:

Computer equipment and servers
Tractors, lorries, vans
Ladders, drills, cranes
Office chairs and desks
Electric vehicle charge points
Refrigeration units
Compressors

However, certain items, such as cars, and items owned before you started a business and items given to you or your business are ineligible for this AIA claim. You would only be able to claim writing down allowances via the main pool and special rate pool with a lower percentage claimed. The main

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Hot Business News Today

Taxman could claw back up to 10% of furlough cash

by  •  • 0 Comments

By Timothy Adler on Small Business – Advice and Ideas for UK Small Businesses and SMEs

The taxman could claw back up to 10 per cent of all furlough cash from small businesses unaware they have overclaimed.

HMRC and the National Audit Office estimate between 5 per cent and 10 per cent of the total furlough money claimed could represent overclaims.

The Government is due to have spent over £70bn on furlough once the scheme ends on 30 September, nearly double the total UK defence spend in 2019/19.

>See also: This change to the furlough scheme could lead to more costly redundancies

At its peak 8.9m people were on furlough; the latest figure is 1.9m.

Nigel Morris, employment tax director at MHA, says innocent errors and incorrect claims will be pursued for many years by HMRC. He advises small businesses check their claims in detail, now that furlough is winding down. They should repay any overclaims through the Government’s own website before HMRC hits them with interest and penalties.

The most common administrative slip-up made by companies has been forgetting to work out claims for flexible furlough on calendar days (365 per annum) and have instead used working days (260 per annum), which they might use for

Read more...

Hot Business News Today

Am I eligible for capital allowance?

by  •  • 0 Comments

By Toby Cotton on Small Business – Advice and Ideas for UK Small Businesses and SMEs
Capital allowances are available on qualifying capital expenditure incurred on the provision of certain assets used in a company or individual’s trade. Not all assets qualify for a capital allowance and the rate of relief will vary. The allowances are deducted from trading profits effectively reducing the tax payable. This would be the income tax for a sole trader or partnership and corporation tax for a company.
In most cases, items purchased which are allocated as “plant and machinery” would achieve 100 per cent relief via the Annual Investment Allowance (AIA). The current AIA limit is £1,000,000 to the 31 December 2021 and then £200,000 from the 1 January 2022.
HMRC is generous in what it considers qualifying expenditure and includes:

Computer equipment and servers
Tractors, lorries, vans
Ladders, drills, cranes
Office chairs and desks
Electric vehicle charge points
Refrigeration units
Compressors

However, certain items, such as cars, and items owned before you started a business and items given to you or your business are ineligible for this AIA claim. You would only be able to claim writing down allowances via the main pool and special rate pool with a lower percentage claimed. The main

Read more...

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Make December 31 end of tax year, says small business

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By Timothy Adler on Small Business – Advice and Ideas for UK Small Businesses and SMEs

Small business owners are overwhelmingly in favour of changing the tax year to the end of December to simplify the system.

In a survey of 500 small and medium-sized businesses, 91 per cent supported moving the date for filing tax affairs, according to accountancy firm BDO.

Companies said that the transition would have to be planned carefully, with longer deadlines to accommodate the change, but they supported the inevitable short-term disruption as it would make the UK tax system fit for the 21st century.

>See also: Nearly 300,000 sole traders face increased tax bills

The British Chambers of Commerce (BCC) told the Financial Times that moving the small business tax year could simplify the accounting process, but cautioned that care should be taken to ensure the adjustment did not encumber companies with extra bureaucracy.

Paul Falvey, a tax partner at BDO, told the Times: “Businesses are hoping that a rethink of the tax system can help them to flourish following the challenges of Brexit and Covid-19. Changing the tax year to December 31 is supported by businesses of all sizes and will be particularly helpful for those with international connections.”

The

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Hot Business News Today

Make December 31 end of tax year, says small business

by  •  • 0 Comments

By Timothy Adler on Small Business – Advice and Ideas for UK Small Businesses and SMEs

Small business owners are overwhelmingly in favour of changing the tax year to the end of December to simplify the system.

In a survey of 500 small and medium-sized businesses, 91 per cent supported moving the date for filing tax affairs, according to accountancy firm BDO.

Companies said that the transition would have to be planned carefully, with longer deadlines to accommodate the change, but they supported the inevitable short-term disruption as it would make the UK tax system fit for the 21st century.

>See also: Nearly 300,000 sole traders face increased tax bills

The British Chambers of Commerce (BCC) told the Financial Times that moving the small business tax year could simplify the accounting process, but cautioned that care should be taken to ensure the adjustment did not encumber companies with extra bureaucracy.

Paul Falvey, a tax partner at BDO, told the Times: “Businesses are hoping that a rethink of the tax system can help them to flourish following the challenges of Brexit and Covid-19. Changing the tax year to December 31 is supported by businesses of all sizes and will be particularly helpful for those with international connections.”

The

Read more...