Making Tax Digital (MTD) is the government’s plan to modernise the tax system through digital records and reporting.
It’s intended to replace paper reporting and eventually bring an end to self-assessment, making it easier for businesses and individuals to keep track of their tax affairs.
After several setbacks and changes to the scheme, you might be wondering what the next steps are, and how you’ll need to prepare.
MTD for individuals
HMRC announced in May 2018 that the roll-out of digital tax services for individuals would be delayed, to free up resources for Brexit.
The tax authority has stopped work on services such as simple assessment and real-time tax code changes, with plans to return to them in the future.
Meanwhile, it has been confirmed that this delay won’t affect progress on digital services for businesses.
MTD for business
A voluntary pilot, which opened in March 2018, is currently under way.
This gives sole traders and certain landlords the option to manage their business records digitally and send updates to HMRC for income tax.
The next step will happen in 2019, when MTD for VAT becomes mandatory for certain businesses.
As we detailed in a previous blog, businesses with a turnover above the £85,000 threshold will be required to make digital records and send quarterly reports to HMRC for VAT from April 2019.
VAT-registered businesses with a turnover below the threshold can also choose to opt in to MTD – but once you’ve joined, you can’t opt out.
From 2020, MTD for businesses is set to become a requirement. This will apply to all other business taxes, including income tax and corporation tax.
What do I need to do?
Even if you don’t fall under the conditions for MTD for VAT, preparing ahead of the 2020 deadline will make it easier to adapt once digital reporting is required for all businesses.
To meet the requirements of MTD, businesses must use software that is able to record and maintain electronic records, as well as sending and receiving information from HMRC.
Adopting cloud bookkeeping also makes your accounting process simpler and more efficient, by keeping all of your information in one place and updating it in real time.
We’ve partnered with KashFlow, which allows you to easily manage your records and tax returns online.
It’s designed with small businesses in the UK in mind, so you’ll be able to use it to meet your MTD requirements.
Speak to us if you’d like to find out more about cloud bookkeeping, or if you have any questions.
Get in touch
We can help get you set up with digital accounting ahead of the MTD deadlines.
Contact lydiav@knightandcompany.co.uk or call 01628 631 056 to talk about your digital accounts.