Making Tax Digital

What is MTD?

MTD stands for Making Tax Digital. It is a government initiative “to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.”

This government initiative was introduced to make sure the UK tax system is effective, efficient and easier for taxpayers.

It began with MTD for VAT in April 2019. The initiative will continue to quickly develop over the next few years.

For a quick overview, why not head to our Facebook page to watch a short clip on MTD.

The story so far:

To begin with, the MTD initiative began by effecting VAT In April 2019.

This meant that businesses with a taxable turnover of over £85,000 would have to sign up to the MTD scheme to keep digital records and complete their VAT returns through MTD compatible software.

As of March 2020, in the budget the government said that more than 1.4million businesses in the UK have signed up for MTD for VAT.

Four million VAT returns were completed with the MTD compatible software.

Also, many businesses under the £85,000 threshold have voluntarily signed up for MTD for VAT.

MTD for VAT:

• records relating to VAT must be kept digitally
• file VAT returns using MTD-compatible software

What’s next?

From the start of April 2022, MTD for VAT will be mandatory to all VAT registered businesses under the £85,000 threshold.

HMRC will also be introducing the mandatory MTD for Income Tax for unincorporated businesses, landlords and the self employed with total business or property turnover above £10,000 per year. Originally this was meant to take place in 2023, but as of September 24th 2021, the government have now said that Making Tax Digital for Income Tax will be introduced in the tax year beginning April 2024.

They will have 2 years to prepare for this change by voluntarily testing the service, before it becomes mandatory in 2024.

Therefore, you will need MTD compatible software to be compliant with the new scheme.

Compliant Software?

There are plenty of programmes out there which are compatible with MTD, here we’ve listed of a few of these programmes for you to choose from:

• Xero
• Quickbooks
• Sage
• FreeAgent

How Spectrum can help you:

The requirement to keep VAT transactions preserved in a digital form for six years makes Cloud software the only viable option for most businesses.

Keeping them on a local PC or server won’t guarantee the required life expectancy. All it takes is a failed hard drive for you to stop being compliant.

In addition, making the transition to compliant software in time will be a challenge for some. Make sure you have a partner who can support you in the process.  

Spectrum can provide you with affordable cloud based bookkeeping solutions to suit your individual business needs.

While we work primarily with Xero, Dext and Quickbooks, we support businesses with Kashflow, Freeagent and Sage, and can help you transition to a Making tax Digital compliant platform.

We are here to help you every step of the way of this transition, just give us a call on 0117 9902218 or send us an email an hello@spectrum-accountancy.co.uk to discuss how we can help you make the move to MTD.

Did you miss our previous blog post about  P11Ds? Click here to read about it.

Whilst you’re here, why not give our social media pages a follow for frequent updates: Twitter, Facebook, LinkedIn 

Categorised in: Accountancy Services, Business, Self Assessment

This post was written by Daisy Vowles