Making Tax Digital Update

For the past few years, the government has been implementing a digital tax policy that will eventually change how almost all businesses manage and pay their taxes.

You may already be aware of Making Tax Digital (MTD). It was introduced in April 2019 with the aim of making it easier for individuals and businesses to get their tax payments correct.

Government figures showed avoidable mistakes cost the Exchequer £8.5 billion in 2018-19.

At the time, HMRC said its ambition was to become “one of the most digitally advanced tax administrations in the world”.

It said MTD would apply fundamental changes to the way the tax system worked, making tax administration more effective, more efficient and easier for taxpayers.

All about the MTD VAT

Three years ago, the focus was on all VAT-registered businesses with earnings of over £85,000 who were required to use specialist accounting software to submit their returns.

Then, in April this year, the scope of the process was extended, requiring businesses with a turnover of under the £85,000 threshold to sign up to using the software.

Submitting your Making Tax Digital VAT

Now the deadline is fast approaching when the existing online accounts for all VAT-registered businesses – who file returns on a quarterly or monthly basis – are closing.

Exemptions are in place and may be allowed, but such applications must be approved by tax officials. A fine could be issued for failure to pay using MTD software, such as Xero, QuickBooks, Sage, etc.

Future changes with Income Tax

Over the next few years, further changes are coming down the line in relation to the government’s fiscal requirements. This includes MTD for Income Tax Self-Assessment.

Self-employed businesses and landlords with annual business or property income above £10,000 will also need to follow the MTD rules and file quarterly updates and a final annual statement.

Those earning less than £10,000 will be able to continue using their online self-assessment accounts.

At a later stage, Corporation Tax will also move to an MTD process although the timetable for these changes is still being finalised.

Expert Help at Hand at Sherlock Accounts

For smaller businesses run by sole traders whose past engagement with HMRC has been online self-assessment, the changes may seem overwhelming and even a little unnecessary given their size.

Add into the situation, the future threat of fines and a fear of the digital unknown and the potential for unwelcome stress is all too real.

However, there is advice and support available when you need it and expert help is at hand.

At Sherlock Accounts, our supportive team can help you get “digital tax ready” with our tailored bookkeeping solutions that will save you time and let you get on with what you love doing the most – growing your business.

Among our wide range of services, we can help you track your tax due, calculate your tax liability and produce year-end accounts.

We can also turn our expertise to VAT and give you the solutions you need.

And at Sherlock, our team of accounting experts are fully qualified in the accounting software that HMRC will expect you to use at some stage in the future.

We understand that the process of making tax digital can seem a little daunting and if you want to discuss the subject with us, simply get in touch, we would be happy to hear from you.