5 min read
With the introduction of Making Tax Digital fast approaching, a complete overhaul of the U.K. tax system will soon be upon us.
5 Tax Returns a year, coming soon!
Making Tax Digital (for income tax), as if that weren’t a mouthful enough in itself, will introduce a complete overhaul to the UK tax system starting next year, 2026.
Self-employed individuals, CIS subcontractors, Landlords and businesses across the U.K. must take steps now to ensure they are prepared for the new legal requirements that MTD will bring
Self-employed individuals, CIS subcontractors, Landlords and businesses across the U.K. must trade exclusively through a business bank account.
This will be a legal requirement in 2026.
Otherwise, they will be subject to heavy financial penalties as part of the new digital reporting system.
In a nutshell, MTD is a digital link between HMRC and your bank account.
Your bank account transactions will be submitted to HMRC via accounting software, such as QuickBooks, every three months.
If you are not using a business bank account and were to link your personal account to HMRC, you may unknowingly be providing far more information to HMRC than they require.
Not only that, but instead of paying for software to report the 30 legitimate business transactions per month that most businesses incur, you will need software to report 200 transactions per month instead, costing you a fortune not only in software fees but accountancy fees as well.
We are already working alongside software providers and HMRC guidelines to ensure that all our clients are ready for the challenges MTD will bring, but we can not open a sole-trader bank account for you.
Banks such as Monzo and Starling offer free sole-trader business accounts.
We recommend either the Monzo sole trader Business account or Starling’s sole trader Business account.
In our opinion, Starling is the better of the two banks, although the application is a little more challenging than Monzo.
In contrast, high street banks such as Barclays and HSBC accounts come with monthly maintenance fees, usually between £10 and £15 PCM, which should also be considered before applying.
In our experience, we also found that the high street banks took far longer to open an account.
Barclays, for example, still requires an in-person interview and can take up to 6 months to open an account.
On the other hand, Starling’s or Monzo’s application is entirely online, and an account can be opened within 7 days.
Our Business Banking support hub offers more guidance on business banking and direct links to the application forms for the banks we recommend towards the bottom of the page.
Here’s a brief introduction to business banking and how to effectively operate a business bank account.
We will provide more information on MTD as the scheme’s introduction approaches, but for now, the only action you should take is to open and correctly use a business bank account.
If you would like more information on MTD and business banking, please book a call.
Can NJB Taxback Help?
Of course, Just get in touch via any of these methods, and we will be happy to assist.
For assistance and expert advice, contact us at 02038220201
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About the Author
NJB Taxback has helped to save its clients £10 million in tax over the last four financial years.
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