Pixel

What is Making Tax Digital?

Gary Green
Gary Green
November 27, 2018

HMRC’s ambitious plans to launch Making Tax Digital (MTD) are laudable. The government and the tax authority have clearly seen the need to move with the times.

In fact, HMRC’s stated ambition is to become one of the most digitally advanced and modern tax administrations in the world.

MTD will make fundamental changes to the way the tax system works; making it more effective, more efficient and easier for taxpayers to get their tax right.

Software to Help MTD

Most business owners will likely already use Xero, Quickbooks, Kashflow or another online software. As chartered accountants we can recommend the best system for you and even for larger retail business who require stock integrated bookkeeping systems we can recommend Sage200.

HMRC originally planned to launch MTD in 2018. However, they delayed it until April 2019. MTD will initially only apply for VAT (known as MTD for VAT) to businesses with a turnover above the £85,000 VAT threshold. This is a challenging timeframe for businesses that are unprepared for the change. There will be no changes to the statutory VAT return filing or payment dates.

The rollout will continue with MTD for Income Tax and MTD for Corporation Tax. Both are expected to follow, but not before April 2020 at the earliest. HMRC has also confirmed that the use of MTD by smaller businesses and for other taxes will remain voluntary for the time being.

Digital Integration

This means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system. Whether you like or loath the sound of MTD there is no doubt that the system will be here to stay and its time to ensure that you are getting prepared.

The move to digital integration will hopefully eliminate many of the existing paper-based processes and help taxpayers avoid costly (often accidental) mistakes.

Information will be digitally transferred to HMRC, helping to avoid errors and at the same time integrating tax filings into day-to-day record keeping activities.

HRMC says that the new Making Tax Digital system will help combat avoidable errors. These errors cost the public purse over £9bn a year. HMRC will also introduce a new points based penalty system. However, there will be a one-year ‘soft landing’ period until April 2020.

Pros and Cons of Making Tax Digital

Ultimately, businesses and individuals will benefit from keeping digital records and filing electronically. It will help avoid manual calculation and transposition errors. Businesses are also less likely to lose important paperwork. The use of digital records should also reduce the risk of errors due to lost or incorrectly recorded invoices.

The initial rollout of MTD for VAT will cause a lot of additional work for many businesses. They will need to examine carefully what changes are required to be MTD compliant. There will also probably be some initial teething problems.

There are also some privacy concerns that far more online information will be available to HMRC. Hopefully, the benefits of MTD going forward will far outweigh the initial planning time and expense.

Interested in our services?
Fill in your details and a member of our experienced team will be in touch shortly to discuss your needs.
We adhere to strict GDPR rules and do not reveal or sell your data to any third-parties. For more, please read our Privacy Policy.
Latest Insights
September 27, 2021
Choosing The Correct VAT Scheme For Your Business

Choosing the right VAT scheme is an important step for small business owners and can have a considerable...

September 21, 2021
How to Claim EIS Income Tax Relief in 2021

If you need to know how to claim EIS income tax relief and enjoy what is...

September 2, 2021
Recovery Loan Scheme - What Is It and How Do I Apply?

As businesses seek to re-open and recover from the global pandemic, there are various forms of...

August 16, 2021
The Super-Deduction Scheme - How Does It Work?

You may have heard the term 'super-deduction' recently and wondered if you could be affected by...

August 12, 2021
The Tax Benefits of Non-Domiciled Status for UK Residents

Having a Non-Domiciled Status if you reside in the United Kingdom can have great benefits for...

July 9, 2021
Stamp Duty Land Tax (SDLT) Surcharge for Non-UK Residents

Stamp Duty Land Tax (SDLT) rates have changed again for non-residents buying a home in England...

July 7, 2021
How Is Cryptocurrency Taxed & Do I Need to Fill A Self-Assessment?

Cryptocurrency may live online with no government control or borders, but if you are in the...

July 5, 2021
Venture Capital Schemes: Tax Relief Guide For Investors

When it comes to finding out what tax relief is available for investors using a venture...

July 2, 2021
Claiming Business Asset Disposal Relief in 2021

Business Asset Disposal Relief (BADR) used to be known as Entrepreneurs’ Relief before 6 April 2020....

View Our latest insights »
Get the latest UK tax & business news and guidance delivered straight to your inbox
We care about the protection of your data. No spam. Unsubscribe anytime.
Copyright © 2021 Key Business Consultants LLP. Reg: E&W OC389322
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram