Making Tax Digital
What is Making Tax Digital?
HMRC believe that the majority of customers want to get their tax right, but unfortunately, errors which could be avoided have resulted in costs to the Exchequer running into billions.
Making Tax Digital requires customers to keep and file digital records, on compatible software which links to HMRC
When Does It Come into Force?
Since April 2022, all VAT registered businesses must comply with Making Tax Digital and submit VAT returns digitally.
Making Tax Digital for Income Tax comes into force on 6 April 2026 and will apply to all self-employed persons and landlords with annual business or property income over £50,000. You will be required to submit electronic information quarterly to HMRC. In April 2027 the threshold is further reduced, so that this applies to landlords or self-employed persons with annual business or property income over £30,000
What Do I Need To Do?
If you are VAT registered then you must use compatible software for your digital accounting records and submission of the VAT return. If you believe that you will reach the VAT registration threshold in the not too distant future, then we recommend that you start using software now, to ease the transition. This will assist with accurate record keeping, so you know exactly when you need to register and all records will be accessible, ready for your first VAT return. We can help you with this and show you how to send receipts and invoices directly to the software and how to raise your sales invoices within the software.
Regarding Making Tax Digital for Income Tax, many of you will have already received letters from HMRC about this, and if you believe you will be affected, it is advisable to get prepared now, rather than leave it until the last minute.
Hurst Bookkeeping can help you with this. We can move you to MTD compliant software if you are not already using this (our preference is Xero and Mandy is a Xero Certified Advisor) and can undertake the bookkeeping and submit the quarterly returns for you.
Even if MTD does not yet apply to you, we would strongly recommend you use the software as this can really ease the administrative burden, provide peace of mind that all of the documentation is in the correct place and enable you to obtain an accurate snapshot of the financial health of your business at any given time by simply viewing the company reports online.