From April 2023 individuals who have income of more than £10,000 per year, including from property, and who complete a Self Assessment Tax Return will have to submit their accounts digitally to HMRC on a quarterly basis.
Whilst this seems a long way ahead now is the time to start thinking how you will manage this.
If your financial year starts in April 2023 your first quarterly submission will be in July 2023 and you will have to keep digital records of your income and expenses for the whole of this first quarter and continue doing so for every subsequent quarter.
What does digitally mean?
Digitally means recording your income and expenses in software which is compatible with HMRC so that you can upload the information directly to them each quarter. Software would include accounts software such as Xero or one of the many other options.
It is not difficult to maintain digital records as you will already be doing this if you are using accounts software and if you are over the VAT registration threshold you will already be submitting your VAT returns digitally.
Transferring to accounts software
If you do not currently use accounts software you need to plan how you will transfer from your current method to a digital method. The transfer will need to be done at the start of a financial year otherwise you will have some accounts information recorded manually and some digitally which will make producing your year end accounts more difficult. And ideally you would want to be using the software for a full financial year before you are required to make submissions so that you can iron out any hiccups (i.e. learn to use it properly or find a bookkeeper who can do it for you).
Once you use accounts software a copy of the paperwork relating to each transaction can be linked to it so that you immediately have the information to hand and don't have to search paperwork or electronic files for it. But you don't have to keep your documents in this way, or even electronically when you are recording and submitting your accounts information digitally.
How will the information be used?
HMRC will use the quarterly returns you submit to check whether your income and expenses information is being recorded accurately so they can let you know if there are any errors. You will also be able to get an estimate of how much tax will be payable. It is therefore important that your accounts are kept up to date so that you are reporting all your income and all your expenses at the end of each quarter.
At the end of your financial year you or our accountant will prepare a final Declaration which will adjust the figures previously submitted and add in any additional information to give a final total on which the tax is calculated. This will replace your Self Assessment Tax Return.
How should you prepare for this?
Don't think it won't happen - it has been piloted by HMRC already and people are already using it.
Decide if you want to use accounts software yourself or whether you need help from a bookkeeper.
Choose the accounts software you want to use and learn to use it by setting it up at least one financial year before you are required to submit returns.
Don't be fooled by software which says it can automatically submit the information for you. The information being submitted will only be what you have recorded and will be as good or as bad as the information you have put in.
Don't leave it to the last minute!
How can we help?
We use accounts software all the time and can get you set up quickly and easily. We recommend Xero as it is straightforward to use. We can set it up for you, give you training to use it yourself or we can do some or all of your bookkeeping for you.
The advantage of using us to do your monthly or quarterly bookkeeping instead of trying to do it all yourself means that your submissions will be on time and accurate with all information for the quarter recorded. And by using software you will have the added bonus of up to date financial information which you can use to make timely business decisions.
Give us a call to get yourself prepared for the inevitable digital quarterly tax submissions.