Making Tax Digital

Tax affairs management is changing for UK businesses. Learn why digital tax management is becoming mandatory and make it work for your business.

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EXPERTISE

Here at Next Level Business, we are 100% digital and have been from the start. As we have been operating on the cloud in a digital-first environment for years, our software is already compatible and we are fully prepared for making tax digital. We have the expertise to support your business through the making tax digital transition.

Currently 8 in 10 businesses are not operating digitally or on the cloud so there is a lot of work to do.

Paul Layte FCA

Making Tax Digital

HMRC is making it mandatory for small businesses to file VAT returns online. If your turnover is more than the £85k VAT threshold, you’ll need to file your returns digitally from your cloud software.

It is part of the government’s plan to make it easier for businesses to stay on top of their day-to-day accounts. It has been designed to make the UK tax system more effective, efficient and easier for taxpayers.

Making Tax Digital for business (MTDfb) begins on 1 April 2019 with MTD for VAT. VAT registered businesses will have to keep their VAT records digitally, and automatically submit their VAT returns to HMRC via MTD compatible software .

Luckily if you are a Next Level Business client no big changes will be made, as we already operate in a digital-first environment with MTD compatible software. You do not need to book an MTD consultation with us as we will communicate any important updates with you, but if you would still like an MTD consultation, do get in touch.

If you are not a Next Level Business client, book a free 30 minute MTD consultation to see how we can help you.

Be Warned

Last year, HMRC decided that those who do not comply with MTD will face a new, ‘points-based’ penalty model. Late filing will attract penalty points, after four late submissions, a penalty will be charged for each late submission. Once a points threshold is reached, a financial penalty is applied.

MTD Timeline

1st April 2019

PHASE 1
VAT goes digital for businesses above the threshold (£85,000)

Businesses whose VAT period ends after 1 April need to start maintaining digital records for this period. For example, those with a VAT quarter Feb-Apr 2019 will need to have digital records from 1 Feb 2019.

1st April 2020

PHASE 2
VAT goes digital for businesses below the threshold (£85,000)

Businesses whose VAT period ends after 1 April need to start maintaining digital records for this period. For example, those with a VAT quarter Feb-Apr 2020 will need to have digital records from 1 Feb 2020.

Date and details TBC by HMRC. Sole traders, partnerships, landlords and trading companies will be mandated to keep digital records and submit quarterly updates for both income and corporation tax purposes.

Frequently Asked Questions

What will I need to do to stay MTD compliant?

Despite some of the the recent confusion, MTD is not as scary as it sounds. All you (or us as your accountant) need to do is record your taxable records and submit your VAT returns through MTD-compatible software – like Xero.

What is due to happen beyond March 2020?

HMRC's plan is to digitalise the UK tax system starting with MTD for VAT. Other areas of MTD such as income tax and corporation tax, have been put on hold until April 2020 at the earliest.

What happens if I’m already on Xero?

Your business will already comply with Making Tax Digital for VAT record keeping and digital links requirements, so you’re in the best place right now.

Soon, you’ll see an option to start moving to MTD for VAT in Xero – just register with HMRC and use the new MTD for VAT experience.

Will my accountant organise MTD for me?

Your accountant can use their own MTD-compliant software, such as Xero, to file VAT returns on your behalf.

However, you need to make sure that your entire record keeping process is digitised, preserved, and without any manual intervention. So if you do your own bookkeeping, you’ll need to start using MTD-compatible software to ensure compliance.