Tax is changing for businesses, accountants and bookkeepers.
Update July 2020
Financial Secretary to the Treasury announced on Tuesday 21st July an update on the future of Making Tax Digital. The government are moving forward with their ambitious programme by extending MTD to:
- The remaining VAT population from April 2022.
- Unincorporated businesses and landlords with over £10k total business or property income filing their Income Tax Self-Assessment returns from any accounting period beginning on or after 6th April 2023.
- Beginning consultations on MTD for Corporation Tax in the Autumn 2020.
For more information on the July 2020 update head over to our blog.
What is Making Tax Digital (MTD)?
MTD is an HMRC initiative designed to make sure the UK tax system is effective, efficient and easier for taxpayers. It is part of the government’s plan to make it easier for businesses to stay on top of their day-to-day accounts. HMRC wants to be one of the most digitally advanced tax administrators in the world. The plan signals the end of paper accounting for millions across Britain.
If you’re already an existing client of Farnell Clarke, then you have nothing to worry about because we’re MTD ready!
So, when does MTD start and does it affect you?
From April 2019, all UK businesses above the £85,000 VAT threshold will need to keep records digitally and submit VAT returns to HMRC using MTD-compatible software.
Today, only 11% of VAT returns are filed using software. If you or your accountant don’t currently file VAT using software then Making Tax Digital could have real impact on how you work, so it’s vital you start researching today.
However, don’t confuse MTD with lodging a return online. Most UK taxpayers have already done that for years. The ultimate objective for MTD has three important distinctions:
- Bank transactions and other financial information will flow automatically into people’s digital tax account, whether or not they declare that income or those expenses.
- Submission will need to be made at least one per quarter.
- Submissions will need to be filed using some form of software
Here are some key benefits from using online accounting software
- Unlimited users and no upgrade fees for MTD functionality
- Save time with automatic bank feeds for easy bank reconciliation
- Get paid faster with online invoicing and payments
- Choose from more than 700 connected apps that meet your business needs
- See a real-time view of your finances
- View the same data as your accountant from anywhere at anytime
"A modern tax system, based on digital technology will make it easier for businesses to get their tax right. Reducing the amount of avoidable errors will also reduce the cost, uncertainty and worry that businesses face when HMRC is forced to intervene to put things right." - HMRC
If you need more help with MTD or would like to chat about how we can help your business ahead of MTD please get in touch by heading over to our start page.