Everything you need to know about Making Tax Digital
Unless you’ve been living under a rock for the past few months, you’ve probably at least heard the phrase “making tax digital” and you might be wondering what it is and if you need to do anything.
In a nutshell, Making Tax Digital (MTD) is a government and HMRC initiative to streamline tax reporting to the revenue. It is designed to make tax reporting more efficient, more effective and easier for taxpayers to get their tax right.
There is a chance that if you are using one of the leading accounting software packages like Xero, Quickbooks etc then you might be all set and may already be filing VAT returns in the MTD-compliant way. However, if not, you only have a couple of weeks to get your affairs in order, as from the 1st April, it will become mandatory to use one of the HMRC approved software packages to file VAT returns.
VAT is the first tax to be mandated by HMRC, as mentioned above, the date this comes into effect is 1st April 2019, unless you’re business has been deferred. In which case, the date is 1st October 2019. You may be deferred if you fall into one of the below categories:
- Not-for-profit organisations (unincorporated);
- VAT Divisions;
- VAT Groups;
- Government Departments;
- NHS Trusts;
- Local Authorities;
- Public Corporations;
- Traders based overseas;
- Annual accounting scheme users;
- Those required to make payment on account.
So if you’re not on that list, your date is the 1st April 2019.
So what about other taxes?
At the moment some people already submit income tax returns through the MTD as part of a pilot scheme. However, if that isn’t the case for you, HMRC has said they are slowing the MTD rollout, and other taxes won’t be mandated until at least April 2020 (perhaps wise given we don’t know what’s happening with Brexit yet!)
Which software should I use?
Most of the major software providers have made their software “MTD Ready”. At RJF our clients use XERO which has had the capability for digital filing for a long time. There are, however, plenty of other options like Quickbooks, Freshbooks and Freeagent. You can find a full list from the government, here: https://www.tax.service.gov.uk/making-tax-digital-software
Hopefully, this information will have alleviated any concerns you had, but If you still have questions, please get in touch with us and either myself or my team will be happy to assist.