10 things to know about Making Tax Digital

Making Tax Digital (MTD) is a government initiative to streamline tax reporting for businesses and individuals.  MTD is a requirement for businesses to keep digital accounting records and file quarterly reports with HMRC.

 

You may have heard about Making Tax Digital (MTD), but do you really know what it is and how it applies to you?  Here are 10 things to be aware of:

1.    MTD for VAT started on 1st April 2019

For VAT periods starting on or after 1st April 2019 businesses need to maintain digital accounting records

 

2.    MTD for VAT is mandatory for business with taxable turnover above the VAT threshold (£85,000)

It applies to all VAT registered entities with turnover above the VAT threshold, including sole traders, partnerships, companies and charities

3.    MTD for income tax is scheduled to go ahead in April 2021

MTD for income tax will affect unincorporated businesses such as sole traders, partnerships.  It is expected to become mandatory for the tax year starting 5th April 2021

4.    Digital refers to how you keep records of accounting transactions

MTD relates to how you keep the records of your day to day transactions (income, expenses).  Under MTD you must keep digital records, for example using accounting software

 

5.    Spreadsheets are allowed for digital record keeping, however they will need to be combined with MTD compatible software

6.    Quarterly reporting

Unincorporated businesses reporting under MTD will need to submit quarterly income and expense reporting to HMRC.

 

7.    Individuals with property income will need to comply with MTD requirements

Individuals will need to keep digital records of property income and expenditure and will need to report quarterly to HMRC

8.    MTD for Companies

MTD for corporation tax will not become mandatory until April 2021 at the earliest, expected to be later

9.    Individuals will have a personal tax account (PTA)

Your PTA will show data from all of your different tax types so that you have a comprehensive up-to-date view of your taxes  in one place

 

10. There will be no change to the final tax return deadline or payment deadlines

There will be an annual reconciliation process for finalising your taxable profit.  The deadline for this will still be 31st January following the end of the tax year

Contact me to find out how I can help you be prepared for MTD

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