In 2019, many UK business will have to make the move over to digital accounting. Making Tax Digital (MTD) is a large part of the government’s plans to make it easier for individuals and businesses to keep on top of their taxes.
This HMRC initiative is going to revolutionise the UK tax system and could cause a lot of headaches if businesses aren’t ready. That’s why we’ve put together this handy guide to answer some of your questions.
What is Making Tax Digital (MTD)?
It’s an initiative from HMRC to make businesses move to a fully digital tax system by 2020. It will affect many taxpayers, businesses, self-employed workers, and landlords. If you fall into the criteria, you will have to maintain digital records and complete online tax returns using compatible software.
You will need to keep a digital record of:
- Business name and contact details
- VAT number & scheme used
- VAT on supplies made & received
- Time of supply or receipt
- Net value (excluding VAT)
- Rate of VAT charged or that you will claim back
- Daily Gross Takings (DGT) – retail scheme users only
- Value of sales made under Gold Accounting Scheme (if applicable)
- Total output tax on purchases under Gold Accounting Scheme
Who will it affect?
From April 1st 2019, VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) will have to use the Making Tax Digital service to keep digital records of their accounts. They will also have to submit their VAT returns using compatible software.
There are a few exceptions to this, but it is a very small minority, with complex requirements. Basically, it is almost certain that you will fall into this category if you or your business are VAT registered and are earning above the VAT threshold.
The organisations that are exempt are as follows:
- ‘Not for profit’ organisations that are not set up as a company
- VAT divisions
- VAT groups
- Government departments
- NHS Trusts
- Local authorities
- Public corporations
- Traders based overseas
- Those required to make payment on account
- Annual accounting scheme users
Why is HMRC doing it?
The plan is to make the UK’s tax system one of the most digitally advance tax systems in the world. It will make it easier for individuals and businesses to complete their tax returns and keep track of their tax affairs. It will also reduce the complexity and room for error, which currently costs the exchequer over £9 billion every year.
What do I need to do?
Right now? You need to start planning for Making Tax Digital. The service will go live on April 1st, 2019. If you aren’t already using digital accounting software, like FreeAgent, Xero, or Quickbooks, you need to adopt this as your primary method of keeping records. Our team are experts in cloud accounting, and we can help you make this move seamlessly.
If you’d like to discuss how Making Tax Digital impacts you or your business please feel free to get in touch with Ali Haider, Senior Accountant, on 01582 250222 or email email@example.com – Visit https://www.haiders.co.uk to learn more.
Written by Haiders