Making Tax Digital (MTD)
The legislation is still being finalised for this so below is our current understanding:
What is Making Tax Digital?
Making Tax Digital will make it a legal requirement for businesses to keep their records digitally.
From April 2019 sole traders, partnerships and those with rental income above the VAT threshold (currently £85,000) will need to start sending quarterly accounts electronically to HMRC
Eventually it will be compulsory for businesses and landlords with income over £10,000.
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.
Quarterly data will need to be submitted via:
- Cloud accounting software that meets the MTD requirements e.g. Xero
- Desktop accounting software that meets the MTD requirements
- Spreadsheets that upload to MTD
It will not be possible to enter numbers direct to HMRC software.
Who and when?
Legislation starts for all yearends starting after 5th April 2019.
Businesses and landlords with yearends 5th April 2019 will be the first to start. Your first MTD quarterly return will cover the quarter from 6th April 2019 to 5th July 2019 and will need to be submitted by 5th August 2019.
Businesses with yearends of 31st March 2019 will not start until a year later. Your first return will be from 1st April 2020 to 30th June 2020 and will need to be submitted by 31st July 2020.
Top Tip – Businesses - Change your yearend to 31st March so that you delay this by a year. However this is not an option for Landlords as your tax year by statute runs to the 5th of April.
Those with turnover below the first threshold will be introduced in later.
Limited companies are planned to be introduced from April 2020.
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.