Making Tax Digital

The Government is in the throes of implementing a new scheme for “Making Tax Digital”.

The idea is that this will make life easier for everyone – easier for business people to keep up to date and track their tax liabilities, easier for their agents(us) as in theory the work can be spread across the year and easier for HMRC to be more up to date and handle problems as they arise.

The hope is that this will lead to less mistakes in the processing of tax returns on mass at the end of each tax year.

What is affected by MTD?

Income tax (Self-Assessment)
VAT
Corporation Tax

What are the new requirements?

Quarterly updates instead of an annual return
All book-keeping and accounting records must be digitalised using software e.g. Xero, QuickBooks etc. that is compatible with MTD.

When does this all happen?

Now - All VAT registered businesses with a turnover of over £85,000 must start keeping their VAT records digitally and submit their VAT returns using MTD compliant software - there are some exceptions to this and these businesses can be delayed until October 2019 (see link to overview below).
April 2022 - All VAT registered businesses with a turnover under £85,000 will be required to follow Making Tax digital rules for their first return starting on or after April 2022.
April 2023 – All remaining businesses and landlords will need to keep their tax records digitally and submit quarterly returns to HMRC using MTD compliant software.
Other businesses can opt in if they want to. Making Tax Digital for Income Tax is already available on a voluntary basis.

What should I do to prepare?

Move to Cloud Accounting. This is a great opportunity to gain greater focus and control over your business. Many of these systems offer the feature of storing receipts electronically, removing the problem of where to store your paperwork! You can also usually link up to your bank account and import all of the transactions, send sales invoices electronically and control a lot of the features using your phone. If you are interested, let us know and we can give you some suggestions.

Helpful Information

https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital