Making Tax Digital is less than nine months away therefore it is vital your business starts planning for it now. The government set out its vision for a transformed tax system a few years ago and since then there’s been a lot of debate and discussion on the topic of Making Tax Digital (MTD), but HMRC has now confirmed that MTD for business will become mandatory, beginning with MTD for VAT from 1 April 2019.
Who is affected on1 April 2019?
All UK businesses that are VAT registered and above the £85,000 VAT threshold will be required to keep their records digitally and submit VAT returns to HMRC using MTD-compatible software. Other areas of MTD, such as Income tax and Corporation tax, have been put on hold until 2020 at the earliest.
This is me! What do I need to do next?
If you’re already using Xero or another compatible online accounting software to submit your VAT returns, you don’t need to do anything. If not, you will need to speak to your accountant and review your current system. Now is an ideal time to move to modern, cloud-based, MTD compatible software.
If I am not affected, do I need to take note of MTD?
Making Tax Digital will provide a more modern, digital service which will help businesses get their tax right, with technology making it easier for them to do so. MTD will be available on a voluntary basis to other businesses (not in the threshold above), for VAT, Income Tax and National Insurance contributions, and it is anticipated that many businesses that are not mandated from April 2019 will choose to move to the new service. Software will help businesses to stay on top of their record keeping, allowing them and those who represent them to understand better how their business is performing. Key benefits include:
- always knowing where you stand when it comes to tax
- having access to tax information online in a single place
- being able to work online collaboratively with an agent
- being able to plan and budget more effectively
Many businesses will need to make a decision about their accounting software soon to avoid facing the complication of changing part way through their accounting year, so if you are not yet using cloud accounting software, get in touch to discuss your options.