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.
At the moment, Making Tax Digital is all about VAT, but, over the coming months and years, it will include Income Tax and then Corporation Tax.
To comply with Making Tax Digital for VAT, 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), with more details being published regularly. So far, we know that they will require all businesses 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. They have said that small businesses (under the VAT threshold of £85,000) can provide “three line reports” meaning just a total for Income, Expenditure and Profit or Loss with no breakdown necessary. We will update this page as more details become available.
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 in the near future 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.