Making Tax Digital
The way you submit your tax return is changing. If your business pays value added tax you’ll already know about MTD for VAT, but if you’re new to business ownership or your business falls under the VAT threshold, you may be yet to set up your new online tax account or submit your first digital VAT return.
As a modern and innovative accounting firm, Knowles Warwick accountants are here to provide Making Tax Digital help and give you a roadmap to success.
What is Making Tax Digital?
Making Tax Digital (MTD) is a new UK tax system that means by 2026 all taxpayers, both individuals and businesses, will have an online account where they can update their details and pay their tax liabilities online.
- no more paper tax returns
- all of your tax information in one place
- the ability to update your account in real time and pay tax based on your activity during the year
- no need for tax rebates as you will only pay what you owe
Making Tax Digital for VAT
If your business turns over more than £85,000 you’ll need to submit your VAT returns online, using approved accounting software.
There are significant advantages to going “digital” and we’ve been working with a number of our clients to help them streamline the way they do their accounts.
Moving to an online accounting software means:
- a clear picture of your current financial position, in real-time;
- automatic updates that mean you can spend more time doing what you enjoy;
- your accounts are 100% online, so there’s no software to install and everything is backed up automatically;
- updates are free and instantly available; and
- upfront accounting software costs are eliminated – upgrades, maintenance, system administration costs and server failures are no longer an issue.
Making Tax Digital timeline
Since April 2019, MTD for VAT reporting has been compulsory for VAT registered businesses and organisations (including sole traders, partnerships, limited companies, non-UK businesses registered for UK VAT, trusts and charities) with turnover above £85,000.
MTD for Group VAT registrations has been deferred until 2022.
From 2023, MTD for Income Tax will become mandatory for self-employed businesses and landlords with an income above £10,000.
Then, from 2026 at the earliest MTD for Corporation Tax will be launched.
Further details have yet to be announced.
Get ready for Making Tax Digital
Follow our checklist to prepare your business finances for MTD:
If you don’t already use software like Xero, Quickbooks or Sage, you may be able to use a Bridging software to help you file your returns, but your HMRC Gateway will no longer be available. You’ll also need to authorise your software before you can get started filing.
Once your software is ready, you’ll need to sign up for MTD on the GOV UK website. To do this you’ll need your existing Government Gateway log in, and your VAT number.
At Knowles Warwick, we’re taking a proactive approach to the ongoing changes to the tax system and will ensure all of our effected clients are prepared and compliant.