Making Tax Digital (MTD): What You Need to Know
In 2015, the HMRC announced that they were launching an initiative to improve the efficiency of the UK tax system, by moving both personal and business tax online – it’s called Making Tax Digital (MTD). By 2020, the HMRC has set the target of migrating the majority of business, self-employed and landlord quarterly tax submissions online.
The plan is that the HMRC will not itself develop software but will instead support and make sure that apps and other software products are available – so both individuals and businesses can complete these processes and tax can become entirely digital.
When and who will have to move to the ‘Making Tax Digital’?
‘Making Tax Digital’ will eventually apply to every individual and business who pays tax in the UK.
VAT registered businesses, with a turnover of over £85,000, will not be mandated to use the MTD system until 2019, and even then – this will only be for VAT payments. For smaller business and individuals, the HMRC has said that they will not be made to use the system until it has been proven to work well, and this is likely to be after April 2020.
What does this mean for businesses?
Many businesses already manage their tax online, for example, 98% of corporation tax returns are submitted digitally – but MTD will mean, by 2020 most companies will be required to record and track their taxes online – and will need to update their digital tax accounts at least four times a year, quarterly.
Will my business need to be 100% digital?
No – the HMRC has confirmed that MTD does not mean that all businesses will need to have digital invoices or receipts. Companies can continue to use paper formats and receipts; they will need to make sure they store everything digitally, i.e. scan and save paper invoices.
MTD Support & Advice
Here at HaesCooper, we know the new era of MTD is daunting, but don’t fret – we’re here to support both existing and new customers on the journey to becoming ‘tax digital’. If you have any questions or concerns – or want to talk about the impact MTD may have on your business don’t hesitate to contact our expert team.
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