HMRC Making Tax Digital (MTD) is a change to how businesses and self-employed individuals keep their accounting and tax records and communicate with HMRC. Created with the aim of making the entire process more streamlined and much easier, the new initiative will require those who need to register for Making Tax Digital to send regular digital updates to HMRC.
You may be wondering what is Making Tax Digital and how it may impact you. We’ve put together this handy guide to tell you everything you need to know, from the current making tax digital timetable to the compatible software required.
What is Making Tax Digital?
Making Tax Digital is part of the government’s plans to make it easier for businesses and self-employed individuals to get their tax right first time and keep on top of their finances. The overall aim of the initiative is to make tax administration more effective, easier and efficient, which will also lead to an eventual end to self-assessment.
Why is it being brought in?
The reason why HMRC Making Tax Digital is being introduced is due to the fact that lots of individuals struggle to get their tax right first time. According to a YouGov Poll, 61% of businesses struggle with losing receipts and there are also many issues with miscalculations when it’s done manually. Digital records are more accurate and the software is much easier to use, which will result in less errors and more people getting their tax right first time.
The end of the tax return
One of the biggest impacts for small business owners and self-employed individuals is that HMRC’s Making Tax Digital initiative will bring about the eventual eradication of the annual tax return. With the new system, tax affairs and updates will be able to be done online using third-party Making Tax Digital software, and you’ll be able to view your tax affairs and liabilities in real time, making it easier to understand how much you owe.
Making Tax Digital timetable
HMRC’s Making Tax Digital initiative will not be mandatory for taxes other than VAT until April 2020 at the earliest. The current Making Tax Digital timetable is as follows:
- From April 2019: It’ll be mandatory for VAT for all VAT registered businesses with a turnover above the threshold of £85,000. Businesses above the threshold will need to sign up for Making Tax Digital for VAT at least 72 hours before the VAT return is due or 7 days before if payment is by direct debit. It will be optional for those below the threshold.
- From April 2020: Quarterly reporting will be mandatory for income tax and corporate tax and for all businesses with a turnover above the threshold of £85,000. It will continue to be optional for those below the threshold.
Making Tax Digital software
In order to submit digital tax returns, compatible Making Tax Digital software will be required. There are already many products available which are either free to customers or available at a low cost. Additionally, any costs spent on Making Tax Digital software can be claimed against your tax. For more information about compatible Making Tax Digital software and help in finding the correct option for your business, take a look at the Government’s handy tool.
SixtyFour8 and HMRC’s Making Tax Digital
At SixtyFour8, our experienced tax advisors are well prepared for Making Tax Digital and have all the relevant information to ensure that your books are compliant with the upcoming system. You won’t have to worry as the new initiative won’t impact your relationship with us, and we’ll still be able to handle all your finances as normal.
So now you know all about what Making Tax Digital is and how it may impact you as a self-employed individual or business owner. If you have any questions about the new government initiative and require further information, don’t hesitate to get in touch with us or pick up the phone today and call 01633 288 299.