What is Making Tax Digital (MTD)?
Making Tax Digital is an initiative set out by the UK Government and aims to make the UK tax system more functional, manageable and straightforward for tax payers.
Who are affected by MTD at this point in time?
Businesses who are VAT registered and have a taxable turnover above the threshold of £85,000.
What if I’m not VAT registered?
Businesses who are not VAT registered and have a turnover below the VAT threshold will not have to act now but can voluntarily choose to operate under MTD if they want to.
If you’re finding this a little confusing, click here and follow the diagram to see if your business is affected by MTD.
When will MTD take place?
MTD will take place from your first VAT period, commencing on or after 1st April 2019.
For income and corporation tax payers, the earliest date this will commence will be in April 2020. Keep reading to find out more information.
What is required?
Businesses will need to retain VAT records digitally and file their VAT Returns using MTD compatible Software.
So, when will my VAT returns have to be filed digitally?
If your VAT quarter ends on 31/03/19, then the first VAT return that will need to be filed digitally will be the quarter ending 30/06/19.
If your VAT quarter ends on 30/04/19, then the first VAT return that will need to be filed digitally will be the quarter ending 31/07/19.
If your VAT quarter ends on 31/05/19, then the first VAT return that will need to be filed digitally will be the quarter ending 31/08/19.
If you submit your VAT returns monthly, the first return that will need to be submitted under MTD will be April’s 2019.
What MTD software is highly recommendable?
There are various software’s that are MTD compatible. Click here to see a list of software suppliers that support the Making Tax Digital pilots.
We support Xero which is the UK’s leading cloud accounting software and is listed by HMRC, as a software which is compatible with MTD for VAT.
Not only is Xero MTD compatible, but there are also many other benefits of using the software too!
Click here to find out more information about Xero.
When will businesses have to be MTD ready for Income Tax and Corporation Tax?
Making tax digital is only being introduced for VAT returns now.
HMRC had also intended for Self-Assessment tax returns and Corporation Tax to be affected with MTD alongside VAT. However, it has been put on hold until a future date will be announced by the treasury. The earliest date this will commence is in April 2020.
Will I still be able to submit my VAT returns on the HMRC website in my Government Gateway?
The answer is no.
HMRC will abolish this system as soon as MTD has started and you will only be able to submit your VAT returns through your MTD software.
We’re encouraging all of our clients to act now, to ensure every business affected by MTD is compliant for April 2019.
If you are not yet affected by MTD, it will still be beneficial to start making the move to online accounting for these reasons:
- It will improve speed and productivity.
- Enhance security.
- It will improve the accessibility to essential financial information.
- It will offer accurate reports and real-time data.
- See your financial position in seconds.
If you would like to find out more information of why switching your business to cloud accounting is a good solution, contact our cloud department and we will be happy to help and guide you through the process.
Be aware, MTD is fast approaching, so if you haven’t acted now, contact us and we can help you get your business sorted.