In a nutshell the best way to describe Making Tax Digital is that it is a requirement for businesses and individuals to keep digital records of transactions and submit to HMRC. It is very often abbreviated to MTD.
This was kicked off by the first tax being moved to MTD, which was VAT. To begin with only those who were above the vat threshold had to comply, and this was made mandatory for all vat registered businesses in April 2022. To become compliant the returns, must have submitted digitally via an HMRC approved software.
In all honesty most businesses were already compliant, simply because of the ease the software provides and time saving.
So as January 2023 the remaining timetable looks as such:
Income Tax and National Insurance:
- April 2026 for all self-employed business owners and landlords with annual business income over £50,000.
- April 2027 for all self-employed business owners and landlords with annual business income over £30,000
Corporation Tax:
- April 2026
So if I am a self-employed sole trader and I want to start thinking about getting ready for MTD, what should I start thinking about?
The most important first step is to decide which vessel you are going to use for the digital keeping of records. Basically, which software are you going to use.
The most important first step is to decide which vessel you are going to use for the digital keeping of records. Basically, which software are you going to use.
The list of the HMRC approved software can be found on the website www.gov.uk This of course includes all the well-known products that are TV advertised, such as Xero, Quickbooks and Sage. Many of these offer a great value for money piece of software and excellent online training is available. Most software start at under £10 per month and of course are an allowable expense.
Obviously using a bookkeeper on a monthly retainer or assistance in setting up the accounts is advisable.
What about MTD for income tax?
MTD for income tax is still a couple of years away but In really do believe it would be beneficial to start getting MTD complaint as soon as possible. This will give you time to get used to the new processes and also have a set of accounts that are easier to action as well as to read.
The software that are available nowadays are designed for ease of use and minimal understanding, thus making bookkeeping a relatively easy task. However, if there are many transactions and activity, then it would be the same as before MTD, so time consuming.
Where can I get help with Making Tax Digital?
If you would like any assistance in moving over to MTD and getting your business ahead of the game, please check out this website:
www.tandem-solutions.co.uk where we often provide help for small businesses on Making Tax Digital.
You can also book a discovery call to discuss the options available to you and offer any advice or questions you may have. Just click on the Book a Call button at the top of our website..