Making Tax Digital (MTD) for all VAT-registered businesses is on the horizon. Make the switch now to ensure you’re compliant by April 2022.
If you’re a small business you may have heard about MTD but put it on the back-burner because it was only applicable to those businesses with an annual turnover above £85,000. But MTD is soon to be a requirement for any VAT-registered business regardless of annual turnover.
What is MTD?
MDT, Making Tax Digital, is a piece of legislation which was introduced in 2019 with the aim to improve business tax reporting and reduce errors. Using a digital, cloud-based solution can help businesses to not only efficiently and accurately submit their tax reports, but also can assist in streamlining business administrative tasks.
In addition, most businesses will benefit from being able to view their business income, expenditure, outstanding invoices, etc… online. So while all compliant softwares do come with a price tag, we hope that the cost can be outweighed by the time-saving benefit of using such a system.
“It used to take me over an hour to put together my business’ monthly invoices, that’s an hour of my time for which I’m not earning any money. As a freelancer, every hour really counts. It took a couple of hours to get used to Quickbooks, and to set my clients and invoices up, but now it takes me about 10 minutes to complete my monthly invoices. And I can quickly and easily see which have been paid, which are outstanding, as well as record my business expenses digitally. My accountant can even login and answer queries I have, which is so much better than emailing, calling, sending over paperwork, etc… I highly recommend switching to accounting software sooner or rather than later.” Jennifer from Manchester
From April 2022, MTD will apply to all businesses who are VAT-registered. Some small businesses may consider deregistering for VAT, however in most cases we’d advise against this because, guess what: MTD for any and all business types with a turnover £10,000+ will come into effect in April 2023.
So for the sake of a year, it’s probably best to just make the switch. And while April next year might seem a long way off, we understand that in the small business world time flies!
You would be wise to look at the various compliant accounting packages now and select one to suit your business type and working practices. Wart & Co are able to work in conjunction with any MTD-compliant solution you chose, but we do have 5 options which we actively promote to our clients. These cloud-based softwares are user-friendly, speed up business admin, and provide a valuable business overview.
What About Landlords?
If you’re a landlord you may be thinking ‘well, I’m not really a business…’, unfortunately in the eyes of MTD, yes you are.
MTD for landlords will be coming into effect in April 2023. If you’re a VAT-registered landlord it’s April 2022, the same as all other VAT-registered business types.
The only exception to this rule is if you’re a landlord who is not VAT registered and whose income from rental properties is less than £10,000 per year. In the limited number of these cases you may continue as you currently do. Of course if you’d prefer to hop on the cloud, you absolutely can. You can also submit your returns online too.