Making Tax Digital (MTD) became mandatory in 2019 for many businesses and additional requirements were implemented in April 2021. With further rollouts scheduled including Making Tax Digital for Income Tax and Making Tax Digital for Corporation Tax, we recommend you fully understand how Making Tax Digital will impact you and your businesses as soon as possible.
Our Making Tax Digital accountants at Alexander & Co are on hand to help you make the transition.
What is Making Tax Digital?
Making Tax Digital is an initiative set up by the government, to try and improve the way businesses and individuals declare their tax to HMRC. It encourages the use of digital account keeping, in order to bring tax into the 21st century.
This new, fully digital tax system aims to help people get their tax right first time and make it easier than ever to submit your tax returns.
The scheme aims to not only help you save money on your taxes, but also prevent late payment fines. The late payment penalties alone can be detrimental to your business, so ensuring you are meeting the tax return deadlines is extremely important.
Making Tax Digital for VAT
VAT registered businesses with a taxable turnover over the VAT threshold (currently £85,000) are required to follow Making Tax Digital rules. This includes keeping digital records and utilising Making Tax Digital compliant software to submit VAT returns.
Businesses who are below the VAT threshold can also voluntarily join the Making Tax Digital scheme now.
What changed in 2021 for Making Tax Digital?
In April 2020, businesses who were required to use Making Tax Digital for VAT were expected to put digital links in place. Due to the impact of Covid019, HMRC delayed this until April 2021.
Since this date, businesses have been required to have digital links in place between all parts of their functional compatible software.
What is next for Making Tax Digital?
The next update to Making Tax Digital is scheduled for April 2022. This will apply to VAT registered businesses that have a taxable turnover below £85k who will need to follow Making Tax Digital rules for VAT. This will apply to their first VAT return that falls on or after April 2022.
Following this, Making Tax Digital will see the rollout of Making Tax Digital for Income Tax (scheduled for 2022) and Making Tax Digital for Corporation tax, which is currently not scheduled to be mandated until at least 2026
Making Tax Digital for Income Tax
Making Tax Digital for Income Tax will apply to self-employed businesses and landlords with annual business or property income above £10,000 and is scheduled to be introduced in April 2023.
If a landlord is also self-employed with other businesses, the income from these activities, together with the income from properties is combined in determining whether an individual is mandated for MTD for Income Tax.
Making Tax Digital for Corporation Tax
The Government published a long-awaited consultation on MTD for Corporation Tax in November 2020. This concluded in March 2021.
HMRC has confirmed that it intends to commence a voluntary pilot in April 2024 for MTD for Corporation Tax. The mandate is expected to follow from 2026 and HMRC has stated that it will not Mandate MTD for Corporation Tax ahead of this date.
Understanding Making Tax Digital with Alexander & Co
Our accountants are on hand to answer any questions you might have about future rollouts, and here are some useful MTD articles written by our tax team:
What can our Making Tax Digital accountants do for you?
Our team of accountants are experienced with the new Making Tax Digital scheme and can help you to get your accounts set up and ready for the switch.
If you are not confident with digital software, we can help you navigate your accounting tools and help you submit your tax returns online. Many digital accounting software will have a MTD feature built-in, allowing you to simply click a button and submit your information straight to HMRC.
If you are looking to make the switch to digital accounting and are looking for software that meets the Making Tax Digital scheme’s requirements, we are experienced in working with a wide range of software packages including Sage Business Cloud and Xero.
Should you require any Making Tax Digital advice, or have any questions about the scheme and how it affects your business, please get in touch with a member of our Making Tax Digital team will be in touch.
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"MD's want to concentrate on running their business while their advisors concentrate on all the business advisory and regulatory problems faced by a company the size of Stax. I want to be able to sleep at night; Alexander & Co allow me to do that."http://www.staxtradecentres.co.uk