Making Tax Digital

WHAT ACTUALLY IS MTD?

The idea of making tax digital is that rather than doing an annual tax return, where you submit all your figures, almost up to a year after the end of the tax year, is to be replaced by digitally uploading financial information to HMRC throughout the year. 

SO, WHO WILL BE AFFECTED?

Every business, including sole traders, will be affected eventually.

MTD will be rolled out from April 2019, the first to be affected will be those who come in above the VAT registration threshold.

From April 2020, all VAT registered businesses will be included.

Other businesses will be added from April 2021.

There will be options to voluntarily register if you wish to. 

SO, HOW DOES IT WORK?

Use software to upload your financial information to HMRC quarterly. HMRC aren't providing the software to do this, so it's up to you, or your accountant, to take care of it. 

There's a plugin for Excel, which is being worked on at the moment, which should bridge the gap between your spreadsheets and HMRC’s software.

HMRC is aiming for a flow of information from each business, straight from your accounting or book-keeping system into another software, if required, and then straight into HMRC's mothership.

Unfortunately, typing (or even copy and pasting) the  numbers into the upload software isn’t allowed!

WHAT DO I DO ABOUT IT NOW?

How urgent this is for you really depends on your type of business and when it's all coming into force.

One of the main things to consider is the software you're using, you need to check that it is compatible with HMRC.

The other consideration really comes down to organisation of doing your accounts and tax returns as the days of submitting accounts annually will soon be gone, once MTD comes into place.

The key is to start looking at how you deal with your finances now. Try and get in the habit of doing things monthly or quarterly so that when MTD comes in, you will be prepared. 

This really is the way I recommend you work.