Making Tax Digital

Making Tax Digital (MTD) is a government initiative that requires businesses to manage their tax affairs digitally, and submit VAT returns using HMRC-compatible software.

Making Tax Digital for VAT will come in from April 2022 for all VAT registered businesses regardless of turnover. If you are currently registered for VAT but your turnover is below the registration threshold of £85,000 you will need to register for MTD for VAT from April 2022. Please contact us to get this stared.

After VAT, the next tax to fall into MTD will be Income Tax Self Assessment from April 2024, which will apply to businesses and landlords with turnover above £10,000. MTD for Corporation Tax will follow, most likely in April 2026.

Xero offers an HMRC-compatible solution that enables you to remain compliant in storing your records digitally, including enabling you to use spreadsheets for VAT and upload the VAT amounts digitally.

VAT-registered business owners will no longer submit the VAT return through the HMRC website. Instead, you’ll have to access compatible software that includes an MTD for VAT feature, like Xero. That software will then be used to submit your return.

Contact us to get started with a free trial of Xero.

Yes. Through MTD, VAT-registered businesses will be required by law to maintain their digital records. MTD for Income Tax Self Assessment will start in 2024.

The main things you need to do to get ready for Making Tax Digital is to:

• Ensure you’re using software or apps that can integrate with HMRC’s Making Tax Digital system.
• Talk to your us to find out how we can help you prepare for Making Tax Digital.

VAT registered businesses with a taxable turnover of more than £85,000 must already follow the rules for Making Tax Digital for VAT by keeping some records digitally.

The government wants to improve the way your tax affairs are manage. The benefits for you are:

• You’ll get a complete view of all your tax information, liabilities, and entitlements in one place — your personalised digital tax account.
• MTD increases accuracy and reduces errors when reporting and filing taxes, so you only pay what you actually owe.
• You will have an up-to-date information as to exactly how much you owe and the tax payments you will need to make. You don’t need to wait until the end of the year to work out how much you or your business owes.
• Updating HMRC with your business and financial information will be faster and easier — meaning more time for you to do the things you enjoy.
• You’ll get prompts from HMRC to ensure you are capturing and reporting the correct information at the right time.
• You can easily pay your tax straight away with online billing.

Yes, but you cannot use the cut and paste functionality in Excel as this doesn’t count as a digital link. If you need to copy figures in your spreadsheet you must use formulas. You will also need to keep either digital or physical copies of invoices and receipts to support the figures in the spreadsheet.

Want to learn about Making Tax Digital at a glance? Download our free cheat sheet.