MAKING TAX DIGITAL - Big Changes!
from MARSLAND NASH
MAKING TAX DIGITAL (MTD)
Making Tax Digital (MTD) is an initiative from HM Revenue & Customs to modernise HMRC’s tax system, and it is the biggest change for you and us in the way we deal with bookkeeping, accounts and tax returns for over 20 years. It aims to make the whole process of administrating tax simpler and more efficient. All of your tax information will be in one place (your digital account) and you will be able to pay tax based on your business activity during the year. You can upload and update your tax account in real time.
Please use these pages to keep informed of the developments for MTD as they progress, and the support we will be offering clients within our services. These pages will be continually updated so please keep an eye on them.
Making Tax Digital for VAT From 1st April 2019
HMRC took a major step forward in their ambition to make tax digital with the introduction of Making Tax Digital for VAT.
If you were a VAT-registered business where your taxable turnover exceeded £85,000 you had to keep digital records of your accounts with effect from period commencing after 1 April 2019. “Digital” excludes manual books and records. If you haven’t already done so, please contact us today to help you sort this out.
Timeline for MTD
After MTD for VAT has been implemented, MTD for income tax (for the self-employed and those with income from property) and MTD for corporation tax are expected to follow.
Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2023.
The government has published a consultation on the future design of Making Tax Digital for Corporation Tax and welcomes views from companies and other organisations within the charge to Corporation Tax, agents, professional bodies and software developers. The government will provide businesses with an opportunity to take part in a pilot for Making Tax Digital for Corporation Tax and will not mandate its usage before 2026.
Making Tax Digital for VAT From 1st April 2021
Phase 2 of the MTD for VAT goes live from 1 April 2021. From this date, over one million UK VAT registered businesses will face new Making Tax Digital obligations. These obligations were originally meant to be implemented from 1st April 2020 but were delayed due to the COVID-19 pandemic. For the first time, these obligations will be backed by the threat of penalties.
Businesses that are required to follow the new rules
VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) are now required to follow the Making Tax Digital rules by keeping digital records and using compatible software to submit their VAT returns. If a business is below the VAT threshold, they can voluntarily join the Making Tax Digital service now.