All about Making Tax Digital (MTD)
Making Tax Digital (MTD) for VAT has been with us since April 2019 and has been mandatory for all VAT registered businesses with annual turnover over the VAT registration threshold of £85,000.
So, what is changing now? From April 2022, it will become mandatory for all VAT registered businesses, regardless of what the businesses turnover is.
What is MTD?
It’s a term we have now all heard in one context or another, but there remains much confusion about the details. MTD is the Government’s initiative to move tax and associated systems into the digital age. The key strategy is that under MTD, all tax records will be maintained digitally and returns submitted via HMRC compliant software.
Who does MTD apply to?
Any VAT registered business will need to make submissions that are MTD compliant.
MTD will be brought in in waves, but the best route to MTD compliance is to make sure everything is up to date now. It will not be very long before MTD will apply to every tax system.
When does MTD take effect?
Currently only VAT returns are affected, but the Government plans to eventually make the entire tax system digital. MTD for Income Tax Self-Assessment (“MTD – ITSA”) comes in to force from 6 April 2024 for self-employed individuals and non-corporate landlords and a year later for partnerships.
No date has been fixed for the introduction of MTD for Corporation Tax (“MTD CT”) but we are told it will not be before 2026.
What do I need to do now?
To reiterate, there are changes to MTD coming in April 2022. They will mean that all businesses that are VAT registered will need to make submissions that are MTD compliant regardless of their turnover.
The actions you will need to take regarding MTD will vary depending on how your bookkeeping is handled, if your AIMS Accountant already handles your bookkeeping and your VAT returns, there is no need for you to do anything to prepare for the upcoming changes to MTD. You can skip to the end of this blog.
If you handle your own books using bookkeeping software, you have two options for MTD-compliance. The easiest option might be for your AIMS Accountant to take over your bookkeeping.
Or if you want to continue doing your own bookkeeping, you will need to ensure that you are signed up with MTD and using HMRC’s compliant software. You will need to confirm with your software provider that they will be HMRC-compliant, then make sure your software is up to date. You will also need to sign up to MTD.
How do I sign up to Making Tax Digital?
To sign up for Making Tax Digital (MTD), you must go to this link, then click on the green “sign up now” button and follow the instructions.
This will ensure you are prepared for MTD. Please be aware that this may increase accounting costs as your AIMS Accountant will need to carry out compliance checks. Handing over your bookkeeping might be the simpler and cheaper option for you.
If you currently do not use appropriate bookkeeping software to manage your accounting records, unfortunately, you will need to overhaul your bookkeeping methods to be compliant with MTD. You will need to look into acquiring HMRC-compliant bookkeeping software as soon as possible in order to avoid penalties, and then take the steps detailed above to sign up to MTD.
If you want to avoid the headache of setting up an entirely new system, remember that AIMS Accountants are happy to take on bookkeeping responsibilities for you - a cheaper and simpler option.
Please enquire with your local AIMS Accountants if you want to pursue this option, or if you need advice about suitable software – we're happy to help.
If you have any questions about future developments regarding MTD or related topics, please get in touch.
Blog by AIMS Accountants
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