Making Tax Digital
The way you report tax is changing for businesses and accountants. Find out why digital reporting is becoming compulsory and how to get up to speed before the deadline.
What is Making Tax Digital?
Making Tax Digital (MTD) is part of the government’s plan to make it easier for businesses to stay on top of their day-to-day accounts. HMRC’s desire is to become one of the most digitally advanced tax administrations in the world by making the tax system more effective, more efficient and easier for everyone to comply.
With MTD, you will submit your data through your accounting software quarterly instead of annually, resulting in far less work for you, less stress and fewer surprises at the end of your financial year.
How do I prepare?
Preparation has already begun, with businesses, accountants and accounting software providers already going digital to improve efficiency and make the transition painless.
With MTD, businesses must keep digital records and submit their VAT returns digitally from the first VAT period. The easiest way to do this is by using digital ready accounting software.
Your software must be able to:
- Keep records in digital form
- Preserve records in digital form
- Create a VAT return from the digital records
- Provide HMRC with VAT data on a voluntary basis
- Receive information from HMRC
Cashflow Manager users can be assured that their software will always be compatible with MTD when they take up a subscription to the latest version.
When is it happening?
Businesses with a turnover above the VAT threshold will be required to use the Making Tax Digital system as of April 2019. Businesses registered for VAT but with a turnover below the VAT threshold can also opt to file their information via MTD if they wish.
From April 2020, sole traders and partnerships with income between £10k and £83k will be required to use MTD.