You may have heard of Making Tax Digital (MTD) whereby you may have to report regularly to HMRC rather than once a year via a tax return. Maybe you are unaware of the changes, so we hope this short article will help you prepare for HMRC’s move to a digital process.
Tell me more…
It’s all called Making Tax Digital for business or MTD for short and this will mean that you will have at least five interactions with HMRC per year using software to report directly. You will be able to do this or it can be done via your accountant.
MTD will apply to VAT (already in place since 2019) Income Tax Self Assessment (ITSA) and Corporation Tax.
MTD has been running since April 2019 for VAT and MTD for ITSA for self employed taxpayers and landlords is due to be phased in from 6 April 2024.
What are the timescales?
- April 2019 – Self-employed & businesses who are VAT registered with a turnover over £85,000.
- April 2024 – Self-employed individuals and landlords whose turnover (not profit) exceeds £10,000 to report under MTD for ITSA
- April 2024 – Corporation Tax pilot scheme with companies joining from April 2026
So the first phase started in April 2019 for VAT registered businesses. If you are not software savvy or a wiz on app’s and pc’s, allow time to plan which systems are going to be best for you.
Can I opt out?
Unfortunately not, although there are some exclusions, such as turning over less than £10,000, being a trustee of a charitable trust, age, disability and location meaning you have no internet connection.
MTD is designed to include anyone carrying out a trade, profession or a vocation. A property business, or any other income chargeable to income tax.
The positive side is that with the right system in place, you could possibly have more relevant information about your business and the process of submitting information to HMRC shouldn’t be a chore.
What software should I use?
This will depend on your circumstances and your bookkeeping skills.
Most of us have a smart phone and there are plenty of apps that will take pictures of receipts and keep them stored, it is what you do with the information from that point onwards.
Most business owners prefer their accounts to be kept up to date by their accountant. Therefore, we would suggest you have a MTD conversation with him or her for some advice for a smooth transition.
So before you decide on a particular app or software supplier such as Quickbooks Online, Xero, FreeAgent etc, why not have a chat with your accountant about the best way forwards for your needs.
MCO Accountancy are based in Haywards Heath, West Sussex and are Quickbooks Online, Quickfile and Xero partners. If we can be of any assistance, please call or email Mike – email@example.com
(Updated March 2022)