Reporting benefits and expenses in real-time
If you sign up for payrolling now, your employees can pay the tax due on their benefits and expenses when they receive their pay in the tax year 2022 to 2023. You will then be able to show your employee how much tax they have paid for their benefits and expenses on their payslips.
Once you start payrolling you no longer need to submit P11D returns to HMRC for almost all benefits in kind.
You must register for payrolling before 6 April 2022 to be ready for the 2022 to 2023 tax year.
Anyone employed through agencies and umbrella companies should be careful they’re not getting drawn into tax avoidance. Many umbrella companies are compliant with the tax rules but some use tax avoidance schemes.
Most tax avoidance schemes simply do not work, including those that may claim to be tax efficient or offer to increase your take-home pay. They sometimes carry high, non-refundable fees and are often provided by, or through, offshore promoters.
HMRC launched a Tax avoidance: don’t get caught out campaign to help agency workers and contractors understand the risks of using tax avoidance schemes and how they could be sold to them, more information is available in the previous article – Tax avoidance – ‘Don’t get caught out’ (update).
Making Tax Digital for Income Self-Assessment (MTD ITSA) pilot
The next phase is to join up unincorporated businesses (sole traders and partnerships) plus landlords whose property income exceeds £10,000 per annum. The mandatory start date for these groups has been deferred until 5 April 2024. However, businesses or landlords that wish to acclimatise themselves to MTD ITSA can join HMRC’s pilot scheme.
Since 9 December 2021 to sign up to the pilot you must go through the company whose bookkeeping software you use.
The key changes in your tax arrangements after joining the MTD ITSA pilot are that you will be required to:
- send quarterly reports of your business records to HMRC
- submit a final declaration and pay the tax you owe by 31 January of the following year
- submit a self-assessment tax return as usual.