Making Tax Digital (MTD) for Income Tax is a HMRC initiative to streamline tax reporting and move recording and reporting income and expenses, if you are either self-employed and/or receive property income, towards a fully digital tax system. This means you will be required to maintain digital records, submit quarterly updates digitally, and submit a final declaration that includes any other income as well as the final business profit/loss.

Who is Effected and What is Qualifying Income?

MTD will affect all sole traders and/or landlords. The date you are required to comply with MTD depends upon the level of your qualifying income. When considering thresholds (detailed below), it is income (not profit) that is taken into account. If multiple sources of relevant income are held, such as trading and rental income, then the income sources are combined to determine if you have exceeded the threshold.

Mandation from 6 April 2026 will be based upon the amounts reported on an individual’s self-assessment tax return for the year ending 5 April 2025. MTD will eliminate the need for a self-assessment tax return.

Key Dates and Thresholds

The key dates and thresholds for reporting under MTD are:

• 6 April 2026: For individuals with gross business turnover and/or rental income of more than £50,000.
• 6 April 2027: For individuals with gross business turnover and/or rental income of more that £30,000;
• A date yet to be determined but within this parliamentary session: For individuals with gross business turnover and/or rental income of more that £20,000.

Exemptions from MTD

MTD requirements will not apply to the following:

• Individuals who do not have a UK National Insurance Number.
• Non-UK resident taxpayers in respect of their relevant foreign income i.e. foreign businesses. However, they will need to comply with MTD for their UK self-employment and property income.
• Foster carers.
• Trusts, estates, non-resident companies and trustees of registered pension schemes.
• Those subject to an insolvency procedure.
• Digital exclusions for people where it is not practical for them to use digital tools or electronic communication due to age, disability, religion or any other reason.

Digital Records and Quarterly Submissions

MTD will necessitate that individuals acquire software that is compatible with HMRC’s systems. The software should be used to keep digital records, submit quarterly records of income and expenditure to HMRC, and provide a final declaration. The software used by Dixcart is fully compatible with these requirements. Under MTD, a minimum of four quarterly submissions will be required for each accounting period and for a business that follows the tax year (6 April to 5 April), the quarterly reports for the 2026/27 financial year would need to include at least the following:

• 1^st Submission: To cover the period from 6 April 2026 to 5 July 2026 – Due by 7 August 2026.
• 2^nd Submission: To cover the period from 6 July 2026 to 5 October 2026 – Due by 7 November 2026.
• 3^rd Submission: To cover the period from 6 October 2026 to 5 January 2027 – Due by 7 February 2027.
• 4^th Submission: To cover the period from 6 January 2027 to 5 April 2027 – Due 7 May 2027.

How to Prepare?

If you are expected to come under MTD from 6 April 2026, then it is important to assess whether you have suitable digital records in place. This will depend upon how you currently maintain your business or rental records and your first step should be to find a suitable record-keeping solution.

If you have multiple sources of income, you will need to know how to manage the records for each one, as you will need to keep separate digital records and separate submissions for each business. However, you will not be required to use the same system for every source and the right solution could depend upon your own particular circumstances and types of income.

You can start to keep digital records at any time, and we recommend doing so  before your MTD start date. This will allow you to become familiar with the record-keeping system that best suits your needs.

How We Can Help?

The above article does not cover all aspects of MTD. Dixcart will be able to help review your position, confirm your mandation date, and discuss how to approach both record-keeping and quarterly reporting requirements before MTD becomes mandatory. If you would like to discuss this in more detail and learn how we can assist you, please contact the Dixcart office in the UK at hello@dixcartuk.com.

HMRC’s R&D Disclosure Service

Companies can now use a new online service introduced by HMRC on 31 December 2024 to disclose errors that have mistakenly been made when claiming R&D tax relief. This service is intended for unintentional errors and is not applicable to deliberate or fraudulent claims. Here’s a summary of how this service works:

Who Can Use the Service?

A disclosure can be made by the company secretary, a director or by someone acting on the company’s behalf (e.g., an agent). If the agent making the disclosure is not the company’s authorised agent, the company will need to complete HMRC’s standard form as part of the disclosure. For more detail regarding this form and its completion please get in touch.

Eligibility Criteria:

Companies can utilise this service if they:

• Have overclaimed R&D tax relief.
• Are unable to amend their tax return due to the expiration of the amendment period.
• Need to repay overpaid tax credits or additional Corporation Tax resulting from the overclaim.

How to Use the Service?

To make a disclosure, companies should:

1. Prepare the Disclosure: Gather all relevant information regarding the overclaimed amount.
2. Calculate Amounts Owed: Determine the additional Corporation Tax or overpaid tax credits to be repaid, including any interest and applicable penalties.
3. Submit the Disclosure: Use HMRC’s online form to provide details of the overclaim and the calculated amounts.
4. Make Payment: After submission, arrange payment for the owed amounts as instructed by HMRC.

Potential Consequences of Waiting for HMRC Contact

If HMRC identifies the error before the company discloses it voluntarily, the company may be liable for extra interest on the unpaid tax. Penalty charges could also be higher since voluntary disclosure usually results in reduced penalties due to the company’s cooperation or HMRC may decide to open a criminal investigation.

Penalties are calculated based on the nature of the error. By waiting for HMRC to discover the error, the company risks being treated more harshly, especially if HMRC views the delay as a sign of non-compliance or concealment.

Conclusion

Companies that identify errors in their R&D tax relief claims should act promptly to disclose and rectify these mistakes. It is advised that the company/agent seeks professional tax advice first to ensure that they have the necessary information.

Dixcart can help facilitate this process. For detailed guidance, please contact Karen Dyerson, Richard Catlin or your usual Dixcart contact on hello@dixcartuk.com.

Over the past few years, there has been an increase in customers buying goods and services using digital platforms and this has accelerated during the pandemic. This article will cover exactly what cryptoassets are and the tax treatment of crypto for both individuals and businesses.

What are Cryptoassets?

Cryptoassets, also known as ‘tokens’ or ‘cryptocurrencies’ or’crypto’, are cryptographically secured digital representations of value or contractual rights that can be:

• Transferred
• Stored
• Traded electronically

There are numerous types of cryptoassets and they each work in different ways. The main 4 types of cryptoasset that you may encounter are as follows:

• Exchange tokens – Intended to be used as a means of payment and this includes the most well know token, the bitcoin.
• Utility tokens – This provides the holder with access to particular goods or services on a platform. This is usually where a business will issue tokens and commit to accepting the tokens as payment for particular goods or services.
• Security tokens – This provides the holder with particular rights or interests in a business, such as ownership or entitlement to a share in future profits.
• Stable coins – These tokens minimise volatility as they are aligned to something that is considered to have a stable value, such as precious metals.

How HMRC Treats Cryptoassets

The tax treatment of all types of tokens is dependent on the nature and use of the tokens. It is not based on the definition of the token. HMRC does not consider the cryptoasset to be currency or money.

Tax Treatment of Cryptoassets for Individuals

Income Tax Treatment

The cryptoasset activity must be recognised as a trading activity for income tax rules to apply. To determine if a trading activity has taken place, HMRC will apply a series of tests known as ‘The Badges of Trade’. Any profits from this activity will be subject to income tax at an individual’s marginal rates (20%, 40% and 45%). There will also be Class 2 and 4 National Insurance due at the current rates applicable.

Capital Gains Tax Treatment

Where the transactions in cryptoassets are regarded as a personal investment, then they should be treated as a chargeable asset for Capital Gains Tax (‘CGT’) purposes. Any gain realised on a cryptoasset bought and subsequently sold, is subject to CGT at the current rate of 10% for a basic rate taxpayer and 20% for a higher rate taxpayer. Losses realised in the same way, can only be relieved against capital gains chargeable to CGT.

Non-Domiciled Individuals

The nature of cryptoassets is that they are decentralised, digital in nature, and do not have a physical location. Thus, determining the location or ‘situs’ of an asset is important for UK resident, non-domiciled individuals as it can change the tax consequences.

HMRC guidance has stated that the location of a cryptoasset is wherever the beneficial owner is resident. If the cryptoasset owner is resident in the UK, then the cryptoasset may also be located in the UK.

There is a need to watch out for the circumstances in which a UK resident, non-UK domiciled individual purchases cryptoassets using their untaxed foreign income or gains. They may have remitted those funds into the UK and triggered a tax liability on acquisition. If the individual then disposes of the cryptoasset and makes a gain, then the gain may also be taxable in the UK, without the benefit of the remittance basis of taxation.

Tax Treatment of Cryptoassets for Companies

Numerous transactions in cryptoassets by a company will invariably be regarded as trading for tax purposes. These profits will be subject to corporation tax at the current rate applicable (currently 19% for 2021 financial year). Any losses arising from cryptoassets are dealt with in the same manner as a trading loss.

However, if a business is not trading in cryptoassets, any profits will be treated as a chargeable gain for companies. The calculation of the gain would follow the pooling rules which also apply to shares and securities.

How We Can Help Crypto Investors

We are aware that HMRC are showing an increasing interest in Cryptoassets and their latest ‘nudge letter’ campaign will reportedly target UK taxpayers who may have failed to properly pay tax on their cryptoassets. 

HMRC are now armed with data gathered from cryptoasset exchanges and other sources, meaning that investigations into the UK tax affairs of crypto investors are likely to be imminent. 

Any taxpayers who receive a nudge letter, or who may be generally concerned about their tax position in respect of cryptoassets, should contact us as soon as possible to discuss the position. Please get in touch with Karen Dyerson, for more information.

Prime Minister Boris Johnson announced on 7^th September 2021 a new UK wide ‘health and social care levy’ to address the funding crisis in this sector.

The new tax will begin as a 1.25% rise in National Insurance from April 2022:

• The current 12% rate on earnings between £9,564 and £50,268 will rise to 13.25%.
• The current 2% rate on earnings over £50,268 will rise to 3.25%.
• Workers above state-pension age will also contribute to the new levy.
• Employers will also need to contribute an additional 1.25% (employer national insurance is currently 13.8%).
• Anyone earning just under £10,000 will still be exempt.
• From 2023 this will become a separate tax on earned income and the National Insurance increase will appear on payslips as a “Health & Social Care levy”.
• From April 2022 a typical basic rate taxpayer earning £24,100 will contribute £180 which equates to £3.46 per week.

From April 2022 a typical higher rate taxpayer earning £67,100 will contribute £720 which equates to £13.85 per week.

Tax Increase on Dividend Tax Rates

From April 2022 there will also be an increase in tax of 1.25% on income received from share dividends, which will include company directors in receipt of dividend income from a company shareholding.

A basic rate tax payer is currently paying tax at a rate of 7.5% on dividend income and from April 2022 this will increase to 8.75%. A higher rate tax payer is currently paying tax at a rate of 32.5% and from April 2022 this will increase to 33.75%. An additional rate tax payer is currently paying tax at a rate of 38.1% and from April 2022 this will increase to 39.35%.