Making Tax Digital

You may have heard the phrase Making Tax Digital (MTD). Software companies such as Quickbooks, Sage and Xero are advertising and are using the words. But what is MTD and how does it affect you and your business?

There are 2 parts to MTD that could affect you; MTD for VAT and MTD for Income Tax. and we’ll take a look at both of these but before we get into that: what is Making Tax Digital?

What is MTD?

MTD at its simplest means that you must keep your accounting records digitally rather than manually. Digital records can be accounting software or it can also be data held on spreadsheets.

MTD for VAT

MTD for VAT is already in place and it means that you must keep digital accounting records for VAT and submit your data to HMRC from those records electronically. That means you send data directly with no manual intervention from your records to HMRC’s computer. If you are using accounting software such as Quickbooks that link is quick and easy to set up. If you are a spreadsheet user then there is software which will extract and send the data for you.

If you need any help or assistance with MTD for VAT, either registering or choosing software then please get in touch on 01922 418111 and one of our team will be pleased to help you.

MTD for Income Tax

As with MTD for VAT this will require businesses to keep their records digitally. With few exceptions it will apply to businesses, and landlords, with a gross income of £10,000 or more. It’s aim is to remove the annual tax return to more regular submissions directly from your software to HMRC’s computer system.

In fact if MTD for Income Tax is implemented the requirement will be for quarterly submissions with a final submission to correct any estimates in the quarterly submissions. That could mean you submitting 5 tax returns for each tax year.

There are some steps you can take to be prepared for MTD for Income Tax and these are:

  1. Work out of it will apply to you.

  2. Look at your year-end to see if aligns with the tax year.

  3. Start your digitisation process as soon as possible.

For help, or guidance, on the above please contact one of our team who will be happy to discuss the needs of MTD and how it will affect your business.