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What is making tax digital? Also known as MTD, the government's programme for the future of taxation is based onusingdigital technology for tax records and returns.
Initially MTD started with VAT in 2019, and the next category of taxation to follow in 2023 is Income Tax Self Assessment (ITSA).You can find out more about MTD here.
The answer is that MTD is a key part of the government's plans to make iteasier for individuals and businesses to get their tax right and keep on top of their affairs.
Making Tax Digital offers significant advantages for tax payers.
However, MTD requires the right software, the skills needed for the software, and an understanding of new reporting schedules. At AMR Bookkeeping Solutions, our experts can advise businesses about all the issues surrounding the new way of managing your tax affairs.
|Tax||Who||Taxable profit threshold||When|
All VAT-registered businesses
1 April 2019
1 April 2022
|Income Tax||Self-employed and landlords||Over 10,000||6 April 2023|
|Corporation Tax||April 2026|
The first requirement to use MTD came in 1 April 2019. Since then, all VAT-registered business with a taxable turnover above eighty-five thousand pounds have had to use HMRC's digital platform for their VAT records and returns. From 1 April 2022, the requirement will extend to all VAT-registered businesses.
The right software is critical to using MTD. At AMR Bookkeeping Solutions, we advise businesses on bookkeeping software for improving business bookkeeping. Our expertise covers solutions for MTD, including Xero, Sage and Quickbooks, and we provide training on leading accounting software. To comply with MTD rules, businesses need to use software which is compatible with HMRC for VAT returns.
For more information on VAT, have a look through our guide.
Our highly respected standards mean that clients can rely on us with absolute confidence, reflected in the many glowing testimonials we receive.
The next stage in the roll-out of MTD is for Income Tax Self Assessment (ITSA). Using MTD will be obligatory from 6 April 2023 for unincorporated businesses (including sole traders) and landlords with total business or property income above ten thousand pounds per year.
You can register now for MTD if you currently complete Self Assessment returns for self-employment or income from property. You can see whether you meet HMRC's criteria for registration here. You will not be required to submit a return before April 2023, but it makes good sense to prepare well in advance and to get to know the software and processes.
As with preparation for MTD and VAT, it is important to familiarise yourself with what to expect when Income Tax comes under MTD. The key points are that you need to:
You can find more information in our webinar on Making Tax Digital for Income Tax.
HMRC states that MTD is about 'helping businesses to do their tax right'. MTD provides significant advantages for taxpayers and is also part of the government's approach to the problem of nine billions pounds of tax lost every year due to errors.
Exemptions from Making Tax Digital are for:
You will need compatible software and a Government Gateway User ID and password (if you don't have one, you can create one when you sign up). Click here for details of signing up for MTD for VAT, and click here for signing up to MTD for Income Tax Self Assessment.
HMRC has no plans to provide free software for MTD. Our experts at AMR can provide advice on the right software for MTD returns for both VAT and Income Tax.