Making Tax Digital (MTD)
Making Tax Digital - June 18 update
Making Tax Digital will make it a legal requirement for businesses to keep their records digitally and it is the start of HMRC being fully digitalised. Currently the planning is split into three areas
- VAT starting April 19 for ALL businesses over £85k turnover
- Income tax – will not start before April 2020
- Corporation Tax – will start after Income Tax
From April 19 the option to logon to HMRC online and type in the numbers to complete your tax return will be removed; instead numbers will need to be submitted directly from compatible software.
For businesses using established software – Xero, QuickBooks Sage etc there will be no change as these are already able to submit direct from the software to HMRC.
The main changes will be for businesses keeping records either manually or on spreadsheet where changes will definitely need to be made.
It is expected that sole traders, partnerships and those with rental income will need to start sending quarterly accounts electronically to HMRC.
It has been announced that this will not come into force before April 2020.
Eventually it will be compulsory for businesses and landlords with income over £10,000 but to start it is likely to be compulsory for those with income over the VAT threshold (currently £85,000), but this hasn’t yet been confirmed.
Within a month of quarter end, tax payers will need to submit Profit and Loss numbers to HMRC.
After the 4 quarters have been submitted, then there is a 5th submission to bring in any annual and tax adjustments so that the 5 added together will be the equivalent of your yearend accounts and tax return.
Limited companies will not be effected until after the Income Tax phase has been rolled out and is working smoothly so I think there is a few years to go yet, but the principal will be the same as Income tax.
Is there help at hand?
Yes, talk to us, we will be able to help.
Is it all bad news?
Undoubtedly, this will feel like more red tape for businesses, another thing to do that isn’t just running your business but:-
You can see this as an opportunity to get on top of your numbers on a quarterly basis, and start using your accounts quarterly to help you make decisions about your business.