Making Tax Digital (MTD)
Making Tax Digital (MTD) is the biggest change to the administration of tax since the introduction of PAYE in the first half of the last century.
It will affect every individual who is a taxpayer and every business in the UK.
It will change the way that businesses keep their accounting records and report their income to HM Revenue and Customs.
The new system will also offer the opportunity for self-employed taxpayers to pay their tax through optional ‘pay as you go’ instalments, based on the detail filed with HMRC under MTD.
Key points include:
Firstly, and most importantly, businesses must keep digital accounting records.
There will be rules about what these records must include and in what detail.
Business must update HM Revenue and Customs with their income and expenses. This must happen at least once every three months.
This should be done via a Making Tax Digital compliant software.
Once a year the accounts for the business must be finalised by adding in the year-end adjustments and capital allowance claims if any.
The period for filing will vary depending on the year end date.
The standard 31st January deadline will remain for business with a 31st March year end.
Taxpayers will enter and/or confirm details of their other sources of income in their personal tax accounts.
Unincorporated business with turnover above the VAT threshold will start reporting under Making Tax Digital from 5 April 2018.
From April 2019, VAT registered businesses will have to submit their VAT returns through Making Tax Digital software.
Finally, Limited Companies will join Making Tax Digital from April 2020.
Categorised in: Archived
This post was written by Daisy Vowles