This year sees the rollout of the extension to Making Tax Digital (MTD) for all VAT registered businesses, regardless of turnover (including self-employed and landlords), which means you need to make sure you are ready. Although, the MTD timeline was delayed by the pandemic, from 1 April 2022, it will be law that all VAT registered businesses, including those voluntarily registered for VAT, need to comply with the MTD legislation for their next VAT period.
What is Making Tax Digital?
MTD is at the core of HMRC's efforts to become one of the most digitally advanced tax administrations in the world. The aim is to make life easier for business owners, accountants and HMRC by improving efficiency and making it easier to comply. It should give a more up-to-date picture of finances and tax owed, as well as making submitting tax information and bills simpler and easier.
The updated system means that digital tax records will be kept, and a tax return will be submitted every three months as opposed to paper-based accounting records and an annual tax return as is widely the case now.
When is MTD happening - key dates
1st April 2022 - All VAT registered businesses will have to switch to the new system from the first VAT period on or after that date. HMRC has confirmed that this is now the effective date for all unincorporated businesses, they must sign up, whatever they earn. (Currently, MTD only applies to VAT registered businesses with a taxable turnover of more than £85,000 p.a.)
6th April 2024 - MTD for Income Tax Self Assessment (ITSA) will come into effect. This will affect self-employed people and landlords that have business/property income above £10,000 p.a.
6th April 2025 - MTD for Income Tax for general partnerships (not LLPs) with income above £10,000 will come into effect.
How we can support you as tax becomes digital...
- Prepare you as early as possible - we can help with any queries or doubts you may have as soon as possible. Doing this creates time for you to become accustomed to the changes which we need to help you implement.
- Establish digital record keeping - Recent research shows that almost one fifth (18%) of small business owners use a paper filing system for their finances, 1 in 10 (10%) keep their receipts and documents loose in a drawer or old shoebox and 8% use their phone to keep records. MTD is going to significantly change the way that many business owners keep their records, so by introducing you to digital record keeping sooner, we can acquaint you with the procedures involved in bookkeeping this way. We can help you to digitise your system and meet deadlines set by HMRC to avoid problems and costs later. We advise making the changes well in advance of the deadline.
We can provide:
- MTD compatible accounting software to digitally keep your records and make submissions to HMRC.
- Automatic feeds for bank entries into your bookkeeping records.
- An App to take pictures of receipts which upload directly into your bookkeeping records (meeting MTD needs).
- Bookkeeping services (or train you) to ensure records are correctly posted and recorded.
The next steps:
Please get in touch and we can help you to meet the new MTD requirements, which unfortunately cannot be avoided!
But don't worry, we are here to advise and guide you.