Making Tax Digital, also known as MTD is a new initiative from HMRC to streamline and modernise financial reporting in the UK.
While MTD has been on the agenda for some time, the latest government finance bill has proposed a two-part roll out:
From April 2019, businesses with a turnover above the VAT threshold will have to keep digital records for VAT purposes.
From 2023, businesses may be asked to keep digital records and update HMRC quarterly for other taxes.
You will need to use some form of software to keep your VAT records and file your VAT returns. For other forms of tax, businesses will likely be required to submit their accounts every quarter. Some may feel it’s a burden but in reality, frequent interactions should be a lot more efficient because there won’t be big backlogs of work to get through.
It may seem to be quite a daunting new set of rules, but we are here to assist you with making the transition. We work with major software companies to be able to offer a solution to make sure that your accounting package works for you and not the other way round!
More frequent submissions will also help you avoid nasty surprises. Big tax bills can accumulate over the course of a year but when tax is calculated quarterly, things are far less likely to get out of hand. The new system will also create more opportunities for advisors (i.e. us!) to help with tax planning.
There are other perks to MTD; online accounting software also allows us and our clients to:
access the business’s accounts from anywhere there’s internet
create ‘bank feeds’ so transaction data flows straight into the ledger
collaborate online by leaving and receiving messages within the software
Online accounting software can also sync with other online services such as POS software, inventory management software, or time-recording apps.
Whilst we will happily work with your existing software package, we can also offer specific guidance and support if you are new to cloud based online accounting. We have set up some short informational videos on our Xero page to help get you started.