March 2025

MTD for Income Tax will involve keeping your detailed accounting records in compatible software and sending quarterly digital reports to HMRC.

If you are a sole trader or run an unincorporated property business, and your ‘qualifying income’ (generally turnover from a sole trade or property business) is £50,000 or more in the 2024/25 tax year, you will be mandated into MTD for IT from 6 April 2026. It’s too early to know your 2024/25 income until your accounts or tax return have been prepared for the tax year, but your 2023/24 self-assessment tax return should give you an indication as to whether or not you will be mandated. If your qualifying income in 2023/24 was above or nearing £50,000, and you expect it to stay at around that level or increase for 2024/25, then there is a good chance that you will be mandated.

HMRC are taking this approach. They have said that they will use 2023/24 returns (the deadline for which was 31 January 2025) to identify which taxpayers are likely to be mandated from 6 April 2026. They will be sending those taxpayers a letter in the coming months, advising them that they are likely to be mandated and explaining why.

We are currently developing our strategy for clients who will be affected. We will implement a tailored solution for each client who needs to adopt new systems. If you receive such a letter, please be assured that we will be in contact to advise you further. This might be a big change for some, but it could actually benefit you. We can help you choose the most suitable software and implement the required processes in a way that adds value to your business.

The Government published a ‘Corporate Tax Roadmap’ as part of the Autumn Budget 2024. The Roadmap is designed to give corporate businesses (and, in some areas, non-corporate businesses) certainty about the tax framework ahead to give confidence in business decisions being made now. The Roadmap sets out the areas in which the Government intends to maintain the status quo for the duration of this parliament, as well as areas in which change is expected.

Starting with corporation tax rates, the Government have committed not to increase the rates of corporation tax paid by small or larger companies and to keep the rates under review to ensure they remain competitive. This means that small companies (those with profits below £50,000 a year) will continue to pay at 19% and larger companies (with profits above £250,000 a year) will continue to pay at 25%, with marginal relief given from the 25% rate for companies with profits between the two thresholds. No changes have been made to the ‘associated company’ regime so, to ensure the correct rate of corporate tax is applied, it remains crucial to fully identify group companies and those under the control of the same individual(s).

Turning to capital allowances and of interest to unincorporated businesses as well as companies, the Government have committed to maintaining the rates of writing down allowances in the main and special rate plant and machinery pools, as well as the availability of the very valuable 100% annual investment allowance for up to £1 million of qualifying expenditure each year. For companies, the unlimited ‘full-expensing’ regime will also be maintained for expenditure on brand-new and otherwise qualifying plant and machinery, with a continued hope of seeing the qualification criteria expanded.

For companies, the two mechanisms for obtaining tax relief for revenue research and development (R&D) expenditure that have been in place since 1 April 2024 will also be maintained. This remains a very complex area so please do reach out to us if you need support in this area or are considering whether you may be able to make a claim.