Making Tax Digital

Making Tax Digital Update

By September 1, 2020 No Comments

The government recently announced new draft legislation to extend Making Tax Digital – so what’s coming in the new ‘MTD Roadmap’ and what do you need to do about it?

laptop with receipts

What’s Been Announced

  • From April 2021, the soft landing period for MTD for VAT will come to an end for those businesses with annual turnover above £85,000
  • From April 2022, MTD for VAT will apply to all VAT-registered businesses, no matter what their turnover
  • From April 2023, MTD for Income Tax will be introduced for all unincorporated businesses and landlords with income over £10,000 per year

 

What You Need To Do

MTD for VAT

If your annual turnover is above £85,000 you should already be using digital accounting software to keep your VAT records and submit your quarterly VAT returns. If not, you need to be fully ready by April 2021 at the latest. MTD for VAT requires you to:

  • Keep VAT records digitally
  • Submit VAT returns to HMRC through MTD-compliant software
  • Ensure digital links are in place for any transfer or exchange of data between software programs, products or applications used as functional compatible software (only necessary for those who are NOT using cloud accounting software such as Quickbooks or Sage for all accounting – find out more here)

We’ve partnered with five digital accounting software providers, and we’re happy to offer a personalised recommendation if you get in touch.

If your annual turnover is under £85,000 you’ve got a bit more time, but we still recommend that you switch to digital accounting software sooner rather than later, so you’re used to it by the time the hard deadline comes around. We’re happy to help you choose your preferred software so get in touch for more information.

MTD for Income Tax

From April 2023, all unincorporated businesses and landlords with annual income over £10,000 will need to keep their records digitally and submit a quarterly summary of their business income and expenses to HMRC through MTD compliant software (such as Quickbooks or FreeAgent).

So if you’re self-employed, or an unincorporated landlord, you should start thinking about moving your business accounting onto MTD-compliant digital software. The sooner you make the switch, the more confident you’ll be when MTD for Income Tax is introduced (you’ll also likely find that digital accounting software reduces admin and accounting errors, saving you time and potentially money). We can help you choose the right accounting software for your business needs, so get in touch for a recommendation.

There’s currently a small pilot of MTD for Income Tax running, and this will now be extended to allow more eligible businesses and landlords to test the system and familiarise themselves with it before April 2023. Information on eligibility and how to join the pilot is available here.

 

Where To Get Help

If you’re a Warr & Co client and you’re unsure what these changes will mean for you, talk to your accountant. If you’re behind on MTD, take a look at our dedicated Making Tax Digital webpage and read through the latest blog posts to catch up.

We’re also happy to talk to prospective clients about what they need to do to prepare for MTD for VAT and MTD for Income Tax. We can offer a free consultation to anyone who needs advice on Making Tax Digital – please get in touch using the form below.

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