If you’ve not heard about Making Tax Digital (MTD) then this article will help explain what it is, the important dates and how it is going to work for businesses and individuals alike.
What is Making Tax Digital?
MTD is all about giving you and your business better time to prepare by creating a seamless link between your financial records and the tax calculation system. Doing so will give you a clear indication as to how much money you need to set aside to pay your tax bill.
MTD will be more accurate and will allow fewer errors or miscalculations as well as being able to crack down and monitor any fraudulent activity – it is seen as a big-time saver and a way to streamline the taxation process between businesses and HMRC.
When is it happening?
The MTD initiative is currently being rolled out in stages, the first of which was MTD for VAT on April 1st, 2019.
After this date, all VAT-registered businesses must comply with all MTD regulations if they have a taxable turnover above £85,000 which is the current VAT threshold, and whose tax quarter begins April 1st needs to use compatible HMRC software to keep a digital record of accounts.
Check your software is compliant
With the introduction of MTD you will need to ensure that your accounting software is compatible going forward.
The best way to check is with your software provider and if you require further advice then one of The Stan Lee team will be happy to help you.
Most of the ERP and accounting software providers will have been preparing for these changes long in advance so if you need to update yours it should be a simple process.
Currently there have been no plans to change the payment dates for the taxes filed and reported under MTD this includes VAT, which is paid quarterly and income tax, which is paid in three instalments January, July and following January. It is always a good idea to check and make a note of these dates so you don’t forget.
Make sure you comply
While this is a big change to the taxation industry it is seen as the best way to make record keeping and paying your VAT bill much smoother.
However, you need to make sure that you comply as if you fail to submit more than once in 12 months you will receive a penalty notice. Once several points have been accrued then HMRC will issue a fine of £200.
Speak to the experts
If you would like any information or advice about Making Tax Digital then get in touch with one of the friendly team here.
At The Stan Lee, our team of highly trained accountants, bookkeepers and business consultants can help you with all aspects of your small business finances.