What is HMRC’s Plan for Making Tax Digital?
HMRC has announced that it won’t expand Making Tax Digital (MTD) beyond VAT-registered businesses until the system is proven successful. The broader rollout is expected to begin in 2024, allowing time for thorough testing and wider adoption of digital record-keeping.
At MyTaxDoc, we’re here to help you navigate these changes. If you have questions about MTD and its impact on your business, feel free to reach out!
What Will Businesses Need to Do for Making Tax Digital When the Scope Widens?
Digital Record Keeping
The first major requirement for MTD is that businesses must maintain records digitally using approved third-party software. If you’re already doing this, you may not notice much change. However, if you’re not yet keeping digital records, now is the time to start and get comfortable with the process before it becomes mandatory.
Quarterly Updates and Tax Estimates
Businesses will need to submit updates to HMRC quarterly using their digital records. This marks a significant shift from the current annual reporting. While many businesses already manage their accounts regularly, for those who don’t, this could feel like an added burden. However, these updates will provide greater clarity about your tax liability throughout the year.
Paying Tax More Frequently
While not officially confirmed, MTD may allow businesses to pay tax more frequently, potentially on a voluntary basis. This would differ from the current system, where tax is paid annually after the financial year ends. Given the introduction of Real Time Information in payroll back in 2013, it’s reasonable to expect similar changes with MTD.
Frequently Asked Questions
How Do I Become Compliant with Making Tax Digital?
To become compliant with Making Tax Digital (MTD), you need to use government-approved software to record your accounts and submit your finances to HMRC. You can find suitable options using HMRC’s software search tool. Alternatively, you can engage a reliable accountant who already uses MTD-compliant software—like MyTaxDoc—to handle everything for you. We know what we’d prefer to do!
If you have any questions or need assistance, feel free to reach out!
Is MyTaxDoc Making Tax Digital Compliant?
Yes! At MyTaxDoc, we use software that is fully compliant with Making Tax Digital (MTD). If you want to avoid the stress of setting up a new digital system, contact us today to see how we can ensure your accounts meet MTD requirements.
What Are MTD Digital Records and What Do I Have to Keep?
Keeping digital records is a key part of MTD. You’ll need to store your records in a digital format, either on a computer or in the cloud. If you use handwritten invoices or receipts, you’ll need to transfer that information into MTD-compliant software before submitting your returns, or let your accountant handle it.
Importantly, you still need to keep original paperwork, as HMRC may require it during tax investigations. Most businesses should retain paperwork for at least six years, while VAT MOSS businesses need to keep it for a minimum of 10 years. HMRC accepts digital copies, so scanning and storing documents can save space. If you prefer traditional methods, send us your paperwork—we can digitise it for you, keeping you compliant with current and future MTD rules.
Isn’t It Free to Submit My Own Self-Assessment Tax Return on the HMRC Website?
Yes, submitting your Self-Assessment Tax Return directly on the HMRC website is free and often straightforward. However, mistakes can happen, which could be costly. Think of it this way: would you cut your own hair just because it’s free? For only £75, a qualified accountant can complete and submit your tax return, giving you peace of mind and freeing up time for what really matters in life.
Will I Have to File My VAT Return More Often Due to MTD?
Currently, no. Making Tax Digital won’t change how frequently you need to submit your VAT return; you’ll still send the same information. MTD will alter how you record your finances and how you submit your quarterly VAT return to HMRC.
Will Making Tax Digital Affect Sole Traders?
Yes, if you’re a VAT-registered sole trader with a turnover above £85,000, MTD rules apply. Eventually, MTD is likely to extend to all businesses with a turnover over £10,000, as well as most individuals who submit tax returns, including the self-employed and landlords.
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