Making Tax Digital
What is Making Tax Digital?
Making Tax Digital (MTD) is an HMRC initiative designed to make sure the UK tax system is effective, efficient and easier for taxpayers.
Making Tax Digital for business begins on 1 April 2019 for VAT. From that date, VAT-registered businesses above the threshold will have to keep digital records and submit VAT returns using compatible software.
Other components of Making Tax Digital, such as income tax and corporation tax, have been placed on hold until April 2020.
Why the change?
HMRC are implementing the change in the aim of creating the following;
Effective - Tax recording will be more accurate, providing fewer opportunities for errors, miscalculations and fraudulent activity.
Efficient - The process will be faster and more automated for businesses, accountants and HMRC, helping them save valuable time.
Easier - With the right software, Making Tax Digital will make it easier for small businesses to record and file their tax returns online.
How does it affect small businesses?
Currently on average only 11% percent of VAT returns are prepared and filed using software. If you don’t currently file VAT using software, Making Tax Digital could have a real impact on how you work.
HMRC have compiled a long list of software providers which will comply with the Making Tax Digital changes; have a look here.