MTD (Making Tax Digital)
Are you MTD ready?
What is Making Tax Digital?
Making Tax Digital
Making Tax Digital (MTD) was introduced in the 2015 budget to modernise and digitalise the current tax system.
The first phase started in April 2019 where VAT registered businesses with a turnover above the VAT registration threshold (currently £85,000), were required to sign up.
Manual record keeping i.e. spreadsheets were no longer acceptable and these businesses had to convert to an accounting software to submit their VAT returns.
Xero, QuickBooks and Sage are the three main software providers that support MTD compliance.
HMRC extended this further in April 2022, and required all VAT registered businesses that hadn’t signed up previously, to comply.
Following on from the successful implementation of MTD for VAT, HMRC are now extending MTD to self assessment from April 2026 (MTD ITSA).
It is expected that MTD for corporation tax will follow thereafter, however this is still to be confirmed.
self assessment (ITSA)
How does it affect you?
Self employed individuals and landlords with a gross income above £50,000, will need to be compliant.
Self employed individuals and landlords with a gross income over £30,000, will need to be compliant.
MTD ITSA for general partnerships has been postponed until further notice.
Gross income (turnover) referred to above, is not the same as profit!
The changes in respect of the basis period reform will still go ahead as planned in 2023-24. This means if your year end is not 5 April you will need to convert.
What does this all mean?
The taxpayer must keep their records digitally, provide digital quarterly updates and provide their ITSA return information to HMRC through MTD compliant software.
How do I get ready?
Naturally, MTD for self-assessment will cause a lot of panic amongst the self-employed and UK landlords.
This is because the majority will be used to filing their self assessment tax returns manually.
The taxpayer will now be required to submit more frequently and get used to a new way of record keeping on a digital system.
HMRC will release statements in the upcoming months to explain the requirements further.
Here at HB Associates we are already working with our software partners to bring the latest information and solutions to you.
If previous experience from the implementation of VAT MTD taught us anything, it is that becoming compliant sooner rather than later is key!
This isn’t something that will go away and HB Associates have the right expertise to make this as stress free as possible for you.
All VAT registered businesses should now be compliant for MTD as this became mandatory from April 2022.
If you are still yet to implement this, please don’t delay and get in touch with us as soon as possible!
Expected to follow after the successful implementation of MTD ITSA.
Check back for regular updates!