Making Tax Digital
Since 2019, VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) have been mandated to keep digital VAT records and send returns using Making Tax Digital (MTD) compatible software.
From April 2022 these requirements will now apply to all VAT-registered businesses, meaning any business who voluntarily registered under the taxable turnover threshold of £85,000 will be affected.
What is MTD?
MTD is a key part of the Government’s plans to make it easier for businesses to get their tax right and keep on top of their tax affairs. HMRC’s ambition is to be one of the most digitally advanced tax administrations in the world, modernising the tax system to make it more effective, more efficient, and easier for customers to comply. This means businesses need to keep digital records and use compatible software to send their VAT returns or Income Tax (see below) updates to HMRC.
Keeping digital records and providing updates to HMRC directly through MTD compatible software is designed to reduce errors, cost, uncertainty, and worry. This streamlined digital experience integrates tax into day-to-day business record-keeping, so that businesses can view their tax position in-year and be confident that they have got their taxes right.
MTD compatible software
There is a large choice of MTD compatible software on the market. In most circumstances we recommend Xero. We have partnered with Xero since 2013 and have helped many clients transfer onto the software, providing set-up and training support. There are many reasons we chose to partner with Xero, outside of the Making Tax Digital requirements, including:
- Being user friendly
- The ability to see how your business is performing in real time
- Being able to keep your invoice records and paperwork stored online, so you no longer need to keep large boxes of paperwork
- Being able to produce sales invoices easily, with the ability to automate your credit control and get paid faster
- Manage your accounts from anywhere, on any device
- Manage your cash flow
- Take payment directly from your sales invoice via an online payment gateway
- Manage your accounts from any device
- Invoice customers and manage timesheets from any device
- Unlimited user access for free
- Sync bank statements automatically
- Download statements and match them to your business accounts.
- Create the perfect solution for you
- Securely store data in the cloud
MTD for VAT
Since 2019, VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) have been required to keep their VAT business records digitally and send their VAT returns using MTD-compatible software. From April 2022 all VAT-registered businesses will be mandated to keep digital VAT records and send returns using MTD compatible software.
MTD for Income Tax
MTD for Income Tax Self-Assessment will apply from April 2024 for unincorporated businesses and landlords with total business or property income above £10,000 per year.
We understand the move to online software is a step into the unknown for many businesses, so we’ve set-up a series of events to help provide information about Xero and how to best transition your businesses finances online. Register for our next “Intro to Xero” event here.
For more information about MTD or Xero, please get in touch for a free meeting. Contact us on:
(E) email@example.com or (T) 01908 219100 (W) advaloremgroup.uk