Making Tax Digital – What You Need To Know31st July 2018
Two years ago, it was proposed that HMRC was to move to a fully digital based tax system. This move is called Making Tax Digital (MTD) and is part of the government’s plan to help businesses move away from keeping paper records. In addition, it is designed to help them make it easier to stay on top of their day-to-day accounts.
Under current proposals the introduction of MTD will be phased in, as follows:
2019/20 Self-employed and unincorporated landlords with net turnover above £85,000 will be required to record their business related transactions digitally using MTD-compliant software and to update HMRC on a quarterly basis for income tax and National Insurance obligations.
2020/21 All VAT registered businesses, whether they are filing quarterly updates or not will be required to file VAT returns using MTD compliant software. In addition, self-employed and unincorporated landlords with net turnover below £85,000 and above £10,000 will be required to record their business-related transactions digitally using MTD-compliant software and to update HMRC on a quarterly basis for income tax and National Insurance obligations.
2020/21 Companies (including incorporated landlords) and complex partnerships will be required to record their business related transactions digitally using MTD-compliant software and to update HMRC on a quarterly basis for income tax and National Insurance obligations.
What does it mean for you and your business?
All businesses will be required to become compliant with MTD, but not at the same time. You will be required to move into the MTD regime (on-board) from the start of your accounting period commencing in one of tax year listed above. The timing of your migration will be determined by the nature of your business i.e. self-employed, limited company and the level of your turnover (as set out above).
For example: If you are self-employed with turnover below £85,000, but above £10,000 and your accounting period end is 30 June. You will not be required to on-board until 1 July 2019 and to file your first quarterly update until after 30 September 2019.
How does MTD benefit you and your business?
There are four main benefits of MTD to small businesses:
- Improved quality of record keeping
- Reduced likelihood of error (due to less manual entry)
- More efficient management of business affairs
- Less time gathering and inputting data
Essentially, MTD is about helping businesses to spend less time working on their finances whilst simultaneously ensuring that your finances are more accurate and up to date.
How can Simas Accounting & Tax help?
The clue is in the question! As tax specialists, Simas Accounting & Tax are ideally placed to advise you on how to ensure your business is ‘MTD ready’. Why not get in touch today, to find out how we can help your business. Call 01234 675575 or email email@example.com