Making Tax Digital
Making Tax Digital – or MTD – is the UK’s biggest tax shake-up in a generation.
Our highly-trained team can help your business prepare for the digital tax revolution. We’ll explain what it is when it's happening and what it means for you.
If you file a VAT return, you'll soon be required to do it in an MTD-compliant way. This isn't just about filing your VAT return, as HMRC want all your vat transactions in your VAT account.
From April 2022
The government has confirmed that the requirement to maintain accounting records in a digital format and submit the data to HMRC electronically will be extended to all VAT registered businesses from 1 April 2022 regardless of the level of taxable supplies.
Government Postpone Making Tax Digital for Income Tax to 2024/25
Having listened to stakeholder feedback from businesses and the accounting profession, the government have announced that they will introduce Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) a year later than planned, in the tax year beginning in April 2024.
This will give the self-employed and buy to let landlords an extra year to prepare for the digitalisation of Income Tax and also allow HMRC more time for customer testing of the pilot system.
The start date for partnerships to join MTD for ITSA has been put back still further to the tax year beginning in April 2025.
There has been no change to the £10,000 per annum gross income threshold which means that most self-employed traders and buy to let landlords will be mandated to comply with MTD for income tax from April 2024.
What does it mean to 'keep a digital record'?
- Your digital records must contain your business name, primary business address, VAT registration number and the VAT scheme you're using.
- Your digital records must also show the details of your sales which have had VAT applied. These should include the date of sale, value of the sale (excluding VAT) and the rate of VAT applied.
Will MTD benefit my business?
There are four main benefits of MTD to small businesses:
- Improved quality of record-keeping
- Reduced likelihood of error (due to less manual entry)
- More efficient management of business affairs - via better financial reports
- Less time gathering and inputting data
If you will need to upgrade your bookkeeping systems for MTD, you may as well 'kill two birds with one stone' and implement a cloud accounting system that improves the quality of your bookkeeping and will ensure you can easily comply with HMRC requirements.
So, where do you stand?...
- If we do all of your bookkeeping now then you are covered
- If you use the latest cloud accounting software then you are probably ok too
- If you use desktop software like Sage or your own system you'll probably have to upgrade it or convert it to another system
- If you use a paper-based system or spreadsheets then you'll definitely need to modernise.
If you would like to discuss Making Tax Digital and need help preparing for the changes to your accounting systems then give us a call on 01530 833474 or email firstname.lastname@example.org