What is making tax digital? (MTD)
Annabel Barnes • 30 September 2021
In the hope to become one of the most digitally advanced tax administrators in the world, HMRC have introduced Making Tax Digital (MTD). They have implemented major changes to how people submit their tax returns in order to make it as efficient and as accurate as possible, reducing the possibility for human errors.
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A lot of research and testing has gone into the strategy of MTD, a significant amount of business took part in the pilot scheme in order to give feedback to the changes being made to the UK tax system.
What does this mean for VAT registered Businesses?
MTD has been around since April 2019 for businesses who are VAT registered. VAT registered businesses all now have to apply to the rules of MTD. This means that they must keep records digitally using compatible software to submit their VAT returns.
Income Tax
MTD will come into play from April 2024 for self-employed individuals whose income exceeds £10,000 per year.
Will it be more difficult to submit my return?
The short answer to this is no. The main reason for HMRC introducing MTD is to make the whole process more streamlined and as easy as possible. The way in which people currently submit their returns means that there is too much room for human error, which can then result in fines later down the line. In order to eliminate human error MTD means that the process will be much easier for you to understand and follow.
Will it create more work for me?
From April 2024 you will need to submit updates to HMRC every quarter and then a final declaration at the end of the tax year which replaces your usual annual self assessment.
Will I need to invest money?
MTD may mean that you need to upgrade or purchase software which is compatible in order for you to comply to the rules. This may cost you a little bit more money than what you are currently paying if you do your own bookkeeping. However, if you have a bookkeeper they will have already invested in compatible software just like we have.
MTD means that you will save time, as the process will be more efficient so the investment is worth it. Many businesses will benefit from having to upgrade their software as they may not have considered this and the impact on saving time with new software implementations will have huge benefits to their business in the long term.
You can check if your current software is compatible here
If you would like to discuss investing in bookkeeping services ahead of Making Tax Digital then please give us a call. We would love to help your business with the transition of MTD.
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