Making Tax Digital
Making Tax Digital, also known as MTD, is one of the most significant changes to the UK tax system in recent times. However, this critical legislation could already be affecting you!
MTD will require all businesses, contractors and the self-employed to keep records digitally and submit tax returns using HMRC-compatible software. The system is intended to make it easier for people to manage their tax affairs and remove avoidable mistakes, which cost the Exchequer up to £8.5 billion annually.
Currently, MTD is focused on keeping digital records and using accounting software to complete VAT tax returns. Very soon, it will include Income Tax and Corporation Tax as well.
MTD became mandatory for most VAT-registered businesses with a taxable turnover above £85,000 from April 2019. From April 2022, this now includes all UK VAT-registered businesses, with upcoming switchover deadlines confirmed for small businesses and the self-employed.
This means if you’re a UK VAT-registered business in the UK, MTD affects you now. If you generate annual business or property income above £10,000, MTD will affect you from April 2024 and MTD for Corporation Tax is currently proposed from April 2026
MTD requires all eligible businesses to use HMRC-compatible software to record their information digitally, submit their tax returns electronically, and preserve this information in an accessible form for six years. Moving forward, income and expenses summaries will be sent to HMRC every three months, enabling the software to track in real-time how much tax you owe.
While not yet compulsory for smaller businesses and landlords, the next deadline is fast approaching. Therefore, why not sign up for the MTD pilot scheme, giving you the advantages of using recommended MTD software and the reassurance of being ahead of the game before the next deadline.
Nick Dagger is the Head of Marketing at ICS Accounting, Chamber Ambassadors.