Making Tax Digital

Making Tax Digital?

Making Tax Digital (MTD) is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.

HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world. Making Tax Digital is making fundamental changes to the way the tax system works – transforming tax administration so that it is:

  • more effective
  • more efficient
  • easier for taxpayers to get their tax right

The majority of taxpayers want to get their tax right but the latest tax gap figures show that too many find this hard, with avoidable mistakes costing the Exchequer over £9 billion a year. The improved accuracy that digital records provide, along with the help built into many software products and the fact that information is sent directly to HMRC from the digital records, avoiding transposition errors, will reduce the amount of tax lost to these avoidable errors.

Making Tax Digital for VAT

HMRC has taken a major step forward in this ambition to transform taxation with the introduction of Making Tax Digital for VAT.

This means that VAT-registered businesses with a taxable turnover above the VAT threshold are required to use the Making Tax Digital service to keep records digitally and use software to submit their VAT returns from 1 April 2021. The deadlines for sending VAT returns and making payments are not changing but the major difference is that businesses will need to use software to keep their business records digitally – this may include dedicated record-keeping software (such as QuickBooks or Xero) or a combination of software packages and spreadsheets.

If you still manage your business on paper or via basic spreadsheets then you’ll need to consider alternative options, as maintaining paper records will cease to meet the legal requirements in tax legislation post 1st April 2021 – please contact us and we will advise you on the most suitable solution for your business. You can also download our  MTD Brochure

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