What is “Making Tax Digital”?
Making Tax Digital (MTD) is a government initiative to modernise HMRC’s tax system, with the aim of making the whole process of administrating tax simpler and more efficient. All of your tax information will be in one place (your digital account) and you will be able to pay tax based on your business activity during the year, uploading and updating your tax account in real time.
Tip – You can set up your digital account today if you haven’t already
Will it affect me?
If you own a business, or are self-employed and you pay income tax, national insurance, VAT or corporation tax then it is quite likely you will be affected. This means you could be required to keep track of your tax affairs digitally using MTD compatible software, and to update HMRC at least quarterly via your digital tax account. Eventually this will replace annual tax returns. It will be a legal requirement and there will be penalties for non- compliance.
Tip – Make sure your software (if you use one) is MTD complaint
What do I have to do?
You will have access to your digital account through the current Government Gateway. You’ll need to log into this and update your information every quarter, using digital accounting software. This means a move away from desktop record keeping and onto a Cloud-based system. As your accountant and tax agent, we can advise you on the software you will need and how to comply with the new quarterly reporting requirements.
Tip – With hundreds of cloud accounting software’s to choose from; ask for a recommendation
When is all this happening?
MTD starts with businesses above the VAT threshold limits (currently £85,000) for accounting periods commencing on or after 6 April 2019. Those affected will be required to keep digital records for VAT purposes. It’s likely that all other businesses will have to comply by 2020.
Tip – Start preparing your business for MTD today