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MTD For Income Tax Self Assessment - Do you need to be registered?
BIG CHANGES FOR SELF EMPLOYED PEOPLE AND LANDLORDS
INTRODUCING MAKING TAX DIGITAL FOR INCOME TAX AND SELF ASSESSMENT
HMRC are launching a new scheme which may impact on how your accounts/self-assessment tax return will need to be submitted.
This scheme is called ‘Making Tax Digital for Income Tax Self Assessment (MTDITSA).
This will only affect individuals, who are sole traders and/or have property income (which is not operated via a Limited Company).
When this scheme comes into effect for you it is dependent on your turnover (ie income before expenses).
The below table shows you the timeline of when registrations will need to happen:-
Turnover Month MTDITSA comes into effect
£50,000.00 or more April 2026
£30,000.00 or more April 2027
£20,000.00 or more April 2028
Please note that if you have a rental property alongside your sole trader business, then for this purpose ‘turnover’ is the combination of the two.
The main change for you is that we will require your records, bank statements etc on a quarterly basis.
HMRC will require 4 sets of accounts/reports to be submitted for the following periods:-
April to June due by 7th August
July to September due by 7th November
October to December due by 7th February
January to March due by 7th May
HMRC will also require a final submission which will show your normal tax return information.
In total 5 submissions will be required where currently there is only 1.
HMRC have currently confirmed that the date for paying your tax payments will remain the same at 31st January and 31st July.
When we deal with your 2024/2025 accountancy and tax matters, we will be able to confirm if you need to register for MTDITSA now and how we will deal with this for you moving forward.
At this present time no action is required from you, however you may receive a letter from HMRC in relation to the above. This letter should only be an introduction letter to MTDITSA.
DON'T DELAY AND REACT TODAY BY CALLING US ON 0121 550 2500
Companies House And The New Verification Rules
Companies House is introducing mandatory identity verification for individuals setting up, running, owning, or controlling a company in the UK.
This measure aims to deter illegal activities and enhance the integrity of the company register.
The verification process will be rolled out in phases, with voluntary verification starting in April 2025 and becoming mandatory for certain roles by Autumn 2025.
Minimum Wages Changes From 1st April 2025
The National Minimum Wage Rates (for those at least school leaving age) /National Living Wage Rates (for those aged 21 and over) Increase From 1st April 2025
The new rates are:-
21 and over - £12.21
18 to 20 - £10.00
Under 18 - £7.55
Apprentice - £7.55
Student Loan Thresholds
The new student loan plan and postgraduate loan thresholds and rates from 6 April 2025 are:-
Plan 1 - £26065
Plan 2 - £28470
Plan 4 - £32745
Postgraduate Loan - £21000
Deductions for:
Plans 1, 2 and 4 remain at 9% for any earnings above the respective thresholds
Postgraduate loan remains at 6% for any earnings above the respective threshold
If the employee’s earnings are:
below the respective student loan and postgraduate loan thresholds, you should update the employee’s payroll record to show they have a student loan and or postgraduate loan and file the start notice — you do not need to return this to HMRC
above the respective student loan and postgraduate loan thresholds, and deductions have not been taken, HMRC will send a generic notification service prompt as a reminder — if deductions still have not started, we may contact you directly
Deductions should continue until HMRC notifies you to stop.
The Official Rate of Interest from 6th April 2025
Following HMRC’s announcement in March 2025, the Official Rate of Interest (ORI) increased from 2.25% to 3.75% on 6th April 2025.
The ORI is used to calculate the Income Tax charge on the benefit of employment-related loans and the taxable benefit of some employment related living accommodation.
As announced at Autumn Budget 2024, the ORI may increase, decrease or be maintained following quarterly reviews. If there are any changes to the rate, these will take effect on 6th April, 6th July, 6th October and 6th January.
Tax Treatment of Double Cab Pickups
The tax treatment of double cab pickups with a payload of one tonne or more have changed for the purposes of capital allowances, benefit in kind and some deductions from business profits. The tax treatment of DCPUs of less than a tonne, generally classed as cars, remains unchanged.
HMRC no longer applies the one-tonne payload test in determining whether a DCPU is primarily suited for the conveyance of goods or burden. A vehicle must be assessed as a whole at the point that it is made available to determine whether the vehicle’s construction has a primary suitability.
DCPUs, including models often referred to as extended, extra, king, or super cab pickups, commonly consist of:
A front passenger cab that contains a second row of seats and is capable of seating about 4 passengers, plus the driver
4 doors, whether the rear doors are hinged at the front or the rear — 2 door versions are normally accepted to be vans
A separate cargo area behind the passenger cab
Transitional arrangements for benefits in kind
Employers that have purchased, leased, or ordered a DCPU before 6th April 2025 will be able to use the previous treatment where a DCPU with a payload of one tonne or more will be classified as a van, until the earlier of disposal, lease expiry, or 5th April 2029.
Transitional arrangements for capital allowances
Expenditure incurred on or after 1st April 2025 for Corporation Tax purposes and 6th April 2025 for Income Tax purposes as a result of contracts entered into before those dates, and where the expenditure is incurred before 1st October 2025, are unaffected.
The current one-tonne payload test included in VAT legislation and applied for input tax recovery purposes remains unchanged.
Capital Gains Tax — Work Out Your Adjustment For The 2024 To 2025 Tax Year
At the Autumn Budget 2024, the government announced changes to the main rates of Capital Gains Tax (CGT).
For the 2024 to 2025 tax year individuals, trustees and personal representatives will need to take additional steps to calculate their CGT if they made disposals on or after 30th October 2024.
This excludes:
Residential property
Business Asset Disposal Relief
Investors Relief
Carried interest
This will make sure the new rate of tax is correctly accounted for in the 2024 to 2025 Self Assessment return.
Employer National Insurance Changes From 6th April 2025
Contribution rate increases
The employer secondary Class 1 National Insurance contributions rate has increased to 15% from 13.8%.
The associated Class 1A and 1B National Insurance contributions rates on expenses and benefits given to employees also increased to 15%.
Secondary threshold for employer National Insurance liability is now lower
The secondary threshold is the point at which employers start to pay employer National Insurance contributions on an employee’s salary. The secondary threshold decreased from £9,100 to £5,000 per year.
Employers now need to pay employer National Insurance contributions where they employ staff earning £5,000 a year or more, and report these payments to HMRC, from 6th April 2025.
Employment Allowance Changes
From 6th April 2025, the £100,000 threshold was removed. The EA was previously restricted to employers with National Insurance contributions bills of less than £100,000 in the previous tax year.
The maximum amount of EA also increased from £5,000 to £10,500, which means more eligible businesses will be able to claim, and at an increased amount. There have been no other changes to the EA eligibility criteria.
Most businesses or charities can apply for EA. However, they cannot do so if they are a public body or a business whose activities wholly or mainly involve the performance of functions which are of a public nature. Whether these functions are publicly funded can indicate functions of a public nature, but funding alone is not the deciding factor.
Businesses will need to continue to consider if they are a connected company. If, at the start of the tax year, 2 or more companies are connected with each other, only one of those companies can qualify for the EA for that tax year.
If the company has just one director and that director is the only employee liable for secondary Class 1 National Insurance contributions, they are also ineligible.
Abolition of the £100,000 EA threshold also means that from 6th April 2025, employers will no longer need to consider state aid where they had previously done so because of the threshold restriction.
Small Employers’ Relief Compensation Rate Increased To 8.5%
The rate increased to 8.5% on 6th April 2025, as a result of aligning it with changes to employer National Insurance contributions.
Employers who qualify for Small Employers’ Relief — if they have paid £45,000 or less in Class 1 National Insurance contributions, can reclaim 100% of all statutory payments they pay except Statutory Sick Pay which cannot be reclaimed, plus an additional 3% compensation. This means small employers can now reclaim 108.5% from HMRC.
The compensation rate applies to:
Statutory maternity
Statutory paternity
Statutory adoption
Statutory parental bereavement
Statutory neonatal care
Shared parental pay
All other employers, paying Class 1 National Insurance contributions, can reclaim 92% of what they pay in these statutory payments with the exception of statutory neonatal care pay.
P11D and P11D(b) Deadlines
For those employers who do not yet payroll, the deadline for reporting P11D(b) Class 1A National Insurance contributions, P11D expenses, and benefits in kind provided in the 2024 to 2025 tax year, is 6th July 2025.
Your P11Ds and P11D(b) must be filed online and at the same time.
Late submission may result in a penalty.
All P11D and P11D(b) forms must be filed online. We recommend you file using one of the following methods:
P11D(b)
You need to submit a P11D(b) form if:
You have submitted any P11D forms
You have paid any employees’ expenses or benefits through your payroll
HMRC has asked you to file a P11D(b) form, by sending you a notification to do so
Your P11D(b) form tells HMRC how much employers’ Class 1A National Insurance contributions you need to pay on all the expenses and benefits you have provided to your employees through your payroll, as well as any you have reported to HMRC on a P11D form.
Nothing to declare
If HMRC has asked you to submit a P11D(b) form and you have nothing to declare, you can tell us you do not owe any employers’ Class 1A National Insurance contributions by completing a no return of Class 1A National Insurance contributions form. Only use this declaration if HMRC has asked you to submit a P11D(b) and you have nothing to declare.
For those employers payrolling benefits in kind
If you are payrolling benefits in kind, you may still have a Class 1A National Insurance contributions liability and will still need to submit a P11D(b) form to tell us how much employer Class 1A National Insurance contributions you owe. You will also need to submit online P11D forms to show any benefits you paid that you did not payroll. Further information on payrolling your employees benefits and expenses is available. You can payroll all benefits and expenses except:
Employer provided living accommodation
Interest free and low interest (beneficial) loans
Joint beneficial loans
If you provide joint beneficial loans to your employees, remember to divide the total cash equivalent figure by the number of employees on the joint beneficial loan. Use this final figure to complete the cash equivalent for each employee on their P11D before you file your returns.
If the final cash equivalent figure is nil, record this as £0.00 on the P11D before submission.
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