You should be responsible as a businessman and remain informed about tax reforms. HMRC (Her Majesty’s Revenue and Customs) is the taxation ministry of the British government. They are constantly updating terms and conditions, and the updates might have an impact on your business.
Here we are going to inform you about the key HMRC changes that are on their way to you. We are going to simplify them for you, so you can easily read them and get an idea about what is going to occur and how it is going to impact your business.
Why Is HMRC Important for Your Business?
HMRC update: HMRC is the tax collector for the UK. They update businesses constantly and keep them in line with ensuring they pay the correct amount of tax. Their regulations influence a great deal, including how you pay and how much you pay. You should thus be informed about what’s going to happen in terms of updates.
Key HMRC Changes Every Business Needs to Know
Each year, HMRC updates the tax system. Some of these updates significantly impact your business. Let’s discuss the most important updates that are set to take effect.
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Making Tax Digital (MTD) for Income Tax
One of the most significant reforms is Making Tax Digital (MTD). It means that businesses must file their tax return digitally, rather than mail it in on paper. This already occurs for VAT (tax), but soon this will cover all other taxes as well, such as income tax.
What Is Making Tax Digital (MTD)?
MTD requires companies to keep their records online and file online tax returns. If your company has a yearly turnover of more than £85,000, you are already filing VAT returns under MTD. However, in the future, companies will be expected to meet MTD requirements for income tax as well.
Why Is This Important to Your Business?
Most companies will be asked to utilize MTD for income tax by 2026. That means you will be asked to keep digital records and suitable software in order to submit your tax returns. It will be faster, less prone to containing mistakes, and enable you to submit on time.
What Do You Have to Do
If your company is not yet MTD compliant, it’s time to get ready. Begin using MTD-compatible software. If you already have accounting software, ensure that it has been upgraded for the rule changes.
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National Insurance Rate Increases
There is another significant change that has occurred: National Insurance increases. This is where it is that companies will be contributing more to National Insurance. This was altered in 2023.
What Is Changing?
In April 2023, National Insurance went up by 1.25% for both workers and self-employed people.
The rise funds the UK’s health and social care.
How Will This Affect Your Business?
If you have staff, you will be contributing more to National Insurance. This will also hit the self-employed. So your payroll bills will be larger.
What Do You Do?
Double-check how the change will impact your business. You may need to rework your budget to factor in the increased cost. Ensure your payroll system has been configured with the new rates.
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Corporation Tax Adjustments
There will also be a shift to corporation tax. The government is increasing the rate of corporation tax from 19% to 25%. It will come into force in April 2023.
Who Will Be Impacted?
Small businesses with less than £50,000 profits will be exempt from the increased rate. Profits between £50,000 and £250,000 will be charged at a higher rate. The rate will increase progressively for such businesses.
What Do You Need to Do?
If your company is short by just £50,000 of profit, you need to plan. You can call an accountant to get an idea of what you are doing. You may have to recast your accounts so that you can prepare your company for the hike in taxes.
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The Implementation of the Digital Services Tax (DST)
If your business is online, then Digital Services Tax (DST) might apply. The DST tax is levied on big digital businesses, including social media companies and online marketplaces.
What Is the Digital Services Tax?
DST is a levy on large digital companies that earn income in the UK. The UK government intends to make these kinds of companies pay tax within the UK, even if they have no office within the UK.
Why Is This Important?
If you are in the digital economy business, you need to be aware of this tax. It primarily focuses on large tech corporations, but small businesses in the digital economy can also be impacted.
What Do You Have to Do?
If your company is online, you will need to talk to a tax expert to discover how the DST will impact your business. You may need to make changes to your business model to remain compliant.
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New Rules on Employee Benefits
There are new rules for employee benefits to be taxed, too. If your business provides cars or medical cover as an employee benefit, you’ll need to follow the new rules.
What’s Changing?
Companies will have to report employee benefits more clearly from April 2023. For instance, if you provide cars, health cover, or other employee benefits, you’ll have to report the benefits accurately to HMRC.
How Is This Going to Affect Your Business?
You will have to keep improved records and report the benefits if you offer benefits to your workers. This will make you pay the appropriate amount of tax.
What To Do?
Check your employee benefits and ensure that these are being citygate reported correctly. Talk to an accountant and get to know the new regulations, and ensure that your company is not falling foul.
How to Get Ready for HMRC Changes
It is essential to be prepared for HMRC changes if you are a business owner. Here are the easy steps that you can follow to prepare:
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Get Yourself Informed with HMRC News
Get yourself informed with HMRC news by searching their website or registering for their newsletter. It will keep you aware of new tax regulations and deadlines.
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Have the Correct Accounting Software
With them planning to computerize tax, make sure that you have accounting software that is capable of interfacing with HMRC. This will have you file your tax return fast and seamlessly, and keep everything organized.
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Seek the Assistance of an Accountant
If you fail to get the new changes, seek the assistance of an accountant. They can explain the changes to you and prepare you.
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Get Your Finances in Order
Rises such as corporation tax or National Insurance will cost you more. Recheck your budget and plan. It will help you avoid being caught out.
Conclusion
HMRC is making new rules that may look hard, but you can manage them if you are ready. Changes like online tax returns and more corporation tax will affect businesses. If you prepare early and get help from experts, your business will be ready.
Frequently Asked Questions (FAQs)
What Is MTD and How Will It Affect My Business
MTD is a scheme under which companies pay tax online. MTD income tax rules will be a requirement for all companies by 2026. If you already pay VAT under MTD, it will be simpler.
How Will the Increase in National Insurance Affect Me
The National Insurance hike results in more payments by employers for their employees and the self-employed. As an employer of people, you will notice an increase in payroll expenses.
What is the Digital Services Tax (DST)?
The DST is a tax on big digital businesses. It demands that such businesses tax themselves within the UK. Whether your company is in the digital economy or not, you should understand how the DST can impact you.
Will the Rise in Corporation Tax Impact My Small Business?
Unless your business profits less than £50,000, you won’t be impacted by the rise in corporation tax. If your profits are between £50,000 and £250,000, you will pay more tax.
How Do I Prepare for All This?
To prepare yourself for HMRC alterations, be aware of forthcoming legislation, and invest in an accountant. Pre-budgeting and being up to date will serve you in addressing alterations.