Making Tax Digital (MTD) is the most fundamental change to the administration of the tax system for at least 20 years. This change might seem daunting, but we’ve compiled everything you need to know so your journey into digital tax recording is as easy going as possible.
Making Tax Digital for VAT
All VAT-registered businesses from April 2022 are required to follow the Making Tax Digital rules by keeping digital records and using software to submit their VAT returns, this applies to all businesses who were previously below the £85,000 threshold.
Making Tax Digital for Income Tax
Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for Making Tax Digital for Income Tax from 6 April 2024.
Some businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot to test and develop the Making Tax Digital service for Income Tax. If you are a self-employed business or landlord you can voluntarily use software to keep business records digitally and send Income Tax updates to HMRC instead of filing a Self-Assessment tax return.
Making Tax Digital for Corporation Tax
The government has published a consultation on the future design of Making Tax Digital for Corporation Tax and welcomes views from companies and other organisations within the charge to Corporation Tax, agents, professional bodies and software developers.
The government will provide businesses with an opportunity to take part in a pilot for Making Tax Digital for Corporation Tax and will not mandate its usage before 2026.
What do I need to know now?
All VAT registered businesses who have not yet signed up for Making Tax Digital for VAT need to do so, to ensure a smooth transition to the new digital accounting recording requirements.
Consider whether your business qualifies for a digital exclusion exemption.
If you’re currently using accounting software, you’ll need to upgrade it to comply with the upcoming requirements.
If you’re currently keeping your records on a spreadsheet, you’ll need to obtain software that will allow returns and updates to be made directly from the spreadsheets. This is not yet available and there are no details of who will be supplying this or when.
If you’re currently keeping paper records, you’ll need to acquire and initiate the use of the appropriate software
What are the exemptions?
Those who are not able to engage digitally due to age, disability, location (e.g. no access to broadband) or religious reasons.
Burgess Hodgson can support your business through these changes and provide you with the services that you need for a smooth-sailing transition into MTD. For more information on how we can help contact email@example.com or call us on 01227 454627