Making Tax Digital: What does it mean for you?
Making Tax Digital (MTD) is the most fundamental change to the administration of the tax system for at least 20 years.
- Paper records will no longer be sufficient. It will become mandatory for businesses and landlords (self-employed, partnerships and limited companies) to use software or a spreadsheet to keep accounting records. Paper accounting records will cease to meet the requirements.
- There will be a requirement to submit updates to HMRC each quarter directly from accounting software within one month of the end of each quarter. (a total of 5 returns a year, including the final submission returns)
The Start Date
Your start date for MTD depends on the size and structure of your business and your accounting year end. We can discuss your specific date with you, but in general:
- Self-employed, partnerships, trust and landlords who complete self-assessment tax returns;
– MTD will become mandatory from April 2019 for businesses and landlords with gross income over the VAT threshold (currently at £85,000 per annum).
– MTD will become mandatory from April 2020 for those under the VAT threshold
- VAT registered businesses;
– From April 2019 all VAT registered businesses will have to file their VAT returns directly from accounting software. The current online VAT return service on HMRC’s website will cease to be available.
- Limited companies;
– MTD will become mandatory for corporation tax reporting from April 2020.
Please note due to the current economic climate, these dates are subject to change.
Businesses and landlords with gross income of less than £10,000 will be exempt. Exemptions also apply to those that are not able to engage digitally for religious reasons or due to a factor such as age, disability or location e.g. no broadband available.
You will be allowed to voluntarily pay your taxes as you go. However, we believe that eventually it is likely that you will be required to make four payments per year on account of tax.
There will be no late filing penalties for at least a year whilst the new system beds in. After that you will suffer penalties if you file your returns late. Penalties will apply for errors in returns or documents and interest will be charged on late payment of taxes.
If you would like to find out more or you need our help with making your taxes digital, please contact us today on 01621 772532