Making Tax Digital (MTD) is a term that can generate both positive and negative emotions in Accountants. On one hand, it is hoped that it will make their job easier, but there are also fears that if clients are not properly prepared, then MTD may create an increased workload for accountants.
The MTD programme is part of the HMRC’s plans to “become one of the most digitally advanced tax administrations in the world” and make tax reporting easier for everyone. HMRC hope that by abandoning paper records and using online software, MTD will minimise errors and improve the overall accuracy of tax submissions.
The timeline of MTD to date is as follows:
In April 2019, MTD for VAT became mandatory for VAT-registered businesses and organisations (including sole traders, partnerships, limited companies etc) with taxable turnover above the VAT threshold.
In April 2022, MTD for VAT will become mandatory for all VAT-registered businesses and organisations, regardless of whether their turnover exceeds the VAT threshold.
In April 2023, MTD for Income Tax will become mandatory for some self-employed or partnership businesses and for some other taxpayers who are registered for Self-Assessment and receive income from rental property. This applies to those with income (turnover or gross rental income) over £10,000.
Landlords with a rental turnover (not profit) of less than £10,000 will not be required to be part of the MTD scheme.
In order to comply with MTD, those businesses or individuals required to join the scheme at the various stages of the above timeline will have to make quarterly digital submissions to HMRC using recognised software. There are many such software solutions available including Quickbooks, Xero, FreeAgent and Sage.
At Curlew Accounting, we primarily use Quickbooks and recommend that clients do the same. A 30-day trial can be downloaded from the Quickbooks website (www.intuit.co.uk).
Although MTD will not become relevant to a lot of our clients until April 2023, we would suggest that it would be beneficial to start using one of the MTD software solutions within the next 12 months, in order that when MTD becomes a mandatory requirement, those clients affected will already be familiar with the software.
Please contact us if you would like to arrange a consultation about MTD or one of the software solutions available.