Making Tax Digital - What You Need to Know

Making Tax digital was initially introduced in April 2019 to make it easier for businesses who are VAT registered to store and file their data digitally. This is no longer the case, MTD now will now affect all individuals with an annual income of over £10,000.

Making Tax Digital is now a legal requirement for VAT and will soon be a requirement for Income tax. We want to ensure that not only are we ready at Hentons but so are our clients.

All of your data now needs to be stored and submitted via a system that is MTD compliant, such as Xero or Freeagent. So, if you, like so many other business owners still need advice on what action you will need to take, this article will cover everything you need to know.

In this article we will explain what Making Tax Digital is, what it means for you as an individual or your business and what Hentons can do to support you!

What’s inside this article?…

  • When Was MTD Introduced?
  • What Is Making Tax Digital?
  • Should I be signed up for MTD?
  • What if I am not signed up for MTD?
  • What Next?

 

When Was MTD Introduced?

HMRC first introduced Making Tax Digital in April 2019. This was to help HMRC’s ambition to become one of the best digital tax administrations in the world and improve efficiencies for businesses and individuals while storing and submitting their data to HMRC.

HMRC are now implementing MTD for the submissions of self-assessment and corporation tax. MTD ITSA is already in place for the submission of income tax returns to HMRC however this will become mandatory as of 2024, where this will come in for Corporation Tax in 2026.

 

What Is Making Tax Digital?

Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.’

Making tax digital is exactly what it says. It means you must submit your returns using a MTD Compliant software. Rather than manually entering data to the HMRC portal. HMRC have a plan to reduce human error and ensure that the process of storing and submitting data is easier and quicker for both them and the preparer.

Should I be signed up for MTD?

VAT registered businesses with a turnover of over £85,000, which is the current VAT threshold to be registered must now comply to MTD rules, using MTD compliant software to submit to HMRC and are required to prepare and hold digital records.

Hentons have a designated digital team to ensure you are up to date and have everything in place to be able to adhere by HMRC’s MTD policy. You should now be MTD compliant or have a plan in place to become compliant if you come under any of the following criteria:

  • You are a VAT registered business and have a turnover over the current VAT threshold.
  • If you are a VAT registered business and are under the current threshold. (April 2022)
  • You are an individual or landlord with an income over £10,000. (April 2024)

If you need support with any MTD queries then contact our Digital Projects Manager, Robyn Jones, today.

What If I Am Not Signed Up For MTD?

If you are not signed up for Making tax digital, you can still sign up using this link: Gov.uk Sign Your Business for Making Tax Digital

Although Making Tax Digital has become a legal requirement for VAT, those businesses who have missed the deadline set by HMRC to sign up will not yet be penalised if they have continued to submit and pay their VAT returns on-time.

Hentons are now offering a free software review where we can advise you what you will need to do moving forwards with MTD and some helpful tips that may make the transition to the cloud a little easier.

What Next?

  1. If you have not signed up for MTD already, and your business has a taxable turnover that is over the VAT threshold, you must now sign up for Making Tax Digital.
  2. If you are not signed up for MTD and are registered for VAT but under the turnover threshold, you need to act fast! You will need to prepare VAT returns and submit them via MTD as of April 2022.
  3. If you are self employed or a landlord with an income of over £10,000 then you should be preparing to file via MTD.

If you need support with the MTD process or just some general advice on your business needs or accounts, Hentons are offering a free software review and are here to help. For more information, please contact our Digital Projects Manager:

Robyn Jones - robyn.jones@hentons.com