Making Tax Digital
Making Tax Digital (MTD) is a key part of the government’s plans to make it easier for individuals and businesses to file accurate returns and keep on top of their tax affairs. MTD is making fundamental changes to the way the tax system works – transforming tax administration so that it is more effective, more efficient and easier for taxpayers to get their tax right.
What is Making Tax Digital
A Digital Revolution
Making Tax Digital is HMRC’s approach to digitalising tax administration and is a fundamental change to the way the UK’s tax system works.
The government has been talking about Making Tax Digital for many years, so why does it matter now? Since 2019, all VAT-registered businesses with a taxable turnover above £85,000 have been required to submit their VAT returns electronically via MTD-compatible software. Moving forward, all VAT-registered businesses will be required to follow MTD rules for their first return starting on or after April 2022.
How does it affect me?
Moving to MTD-compatible software
If you are not already required to have MTD compliant records, you will be in the future.
Based on our experience, we recommend you start to create and store your tax records digitally sooner rather than later. It will not only make it easier when the time comes to be compliant, but it also means you can start reaping the benefits of real-time records and add-ons apps.
We have already moved many of our clients to one of our recommended MTD compliant cloud-based software packages:
For more information on the benefits of Cloud accounting, visit our dedicated ‘about the cloud’ page.
How long do I have to prepare?
Making Tax Digital for VAT
VAT-registered businesses with a taxable turnover above the VAT threshold of £85,000 are required to keep their VAT records digitally and to submit their VAT returns using compatible software.
VAT-registered businesses will be required to follow MTD rules for their first return starting on or after April 2022.
Making Tax Digital for Income Tax
Self-employed and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2024. When MTD for income tax becomes mandatory, affected businesses will be required to:
- Maintain their accounting records digitally through a compliant software. Maintaining paper records will no longer meet the requirements of the tax legislation.
- Submit information quarterly to HMRC and finalise their tax position after the end of the tax year.
Please note, self-employed businesses or landlords currently have the option to voluntarily opt-in to keeping digital records and submitting Income Tax updates to HMRC. This would replace the need to file a Self-Assessment tax return.
For partnership businesses, MTD for Income Tax will be introduced from April 2025.
Making Tax Digital for Corporation Tax
MTD for Corporation Tax will not be mandated until at least April 2026.
Switching it’s easy
We are here to help
We understand that switching to new software can be a daunting prospect, but this is why we have a dedicated team of certified cloud advisers ready to help you.
We move clients from desktop systems and other online platforms to the cloud every day, and have made sure the switching process is simple and the transition as seamless as possible with minimal disruption. We also offer 1:2:1 training to help you fully understand the software and utilise it to its best ability. This starts at £65 + VAT per hour.
Switching to the cloud can happen at any point in your accounting cycle so why not make the switch today?
Call 01454 619900 to discuss your business and which cloud accounting software is best suited to its specific needs.
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