Making Tax Digital (MTD) has been introduced by HMRC to help individuals and businesses ensure that they are getting their tax right. It means that you will have to leave your spreadsheets or paper records behind and move over to digital systems. This transformation aims to streamline the tax process, reducing errors and making it easier to manage your financial records. By using software that is compliant with MTD standards, you can automate calculations and submissions, which simplifies the overall tax filing experience. Additionally, digital records are often more secure and easier to retrieve, offering long-term benefits for both personal and business financial management.
At the moment, Making Tax Digital is all about Income Tax (MTD ITSA). To comply with Making Tax Digital, businesses have to keep digital records. This must be done using what HMRC calls ‘compatible software’. In other words, it must be able to connect directly to HMRC and send your details to them using digital links.
MTD was introduced for nearly all VAT-registered businesses with a taxable turnover above £85,000 in April 2019. They have to use Making Tax Digital software to keep digital records and make VAT submissions to HMRC. In April 2022, this was extended to all VAT-registered businesses in the UK.
The new focus for HMRC with MTD is Income Tax (MTD ITSA). All Sole Traders and Landlords with income (turnover) over £50,000 a year will need to provide Quarterly reports of their Income and Expenditure and therefore their Profit or Loss and then a final return bringing the quarterly reports together annually in the usual way.
But, don’t worry, you’ve come to the right place to get ready. We use QuickBooks’ HMRC-recognised MTD software and can ensure that you are set up and ready to file digitally straight away if you are VAT registered or from April 2026 for MTD ITSA etc.. It makes sense to start using compliant software now so that you are used to it when the time comes.
If you have any questions about Making Tax Digital and how it affects you and your business, get in touch with us for a free, no obligation chat. If you would like to read more about MTD and the process HMRC is using etc., click here.
