Making Tax Digital

Did you know it's now mandatory for UK businesses to keep certain records digitally? Find out more about Making Tax Digital and make sure you're fully compliant.
Making Tax Digital

What is ‘Making Tax Digital’?

Making Tax Digital (MTD) is the most fundamental change to the administration of the tax system for at least 20 years.

The essential elements for businesses and organisations are:

  • Paper records will no longer be sufficient: It will become mandatory for almost all businesses and organisations (self-employed, partnerships, ltd companies and others) to use software or a spreadsheet to keep accounting records. Paper accounting records will cease to meet the requirements of tax law.
  • Returns and Quarterly Reporting: There will be a requirement to submit VAT returns and income tax updates (quarterly and annual) to HMRC, directly from software.

Accountly is the future of online accounting. We provide an online based service, introducing you to 21st century accountants who use advanced cloud-based software to save time and money – ensuring you never have to worry about compliance with HMRC rules.

Your accountant should be able to support you through any changes, providing the ongoing services that you need. These changes are so fundamental to traditional accounting services that you’ll need to review your record keeping systems, and to reconsider what work you decide to do yourself and which activities you’d like your accountant to handle.

When did MTD come into effect?

For businesses registered for VAT and with turnover above the VAT threshold, the requirement to keep digital accounting records and to file VAT returns using MTD compliant software commenced from April 2019 (the first VAT period starting on or after April 1 2019).

Income Tax (self employed, partnerships, LLPs, trusts and landlords who complete self assessment tax returns): Making Tax Digital is expected to become mandatory for income tax reporting, but not before 2020. Pilots of MTD for income tax have started.

Corporation tax (limited companies): The timings for MTD for corporation tax have yet to be confirmed but it will not become mandatory before April 2020.

What are the exemptions?

  • There are exemptions for those who are not able to engage digitally for religious reasons, or due to a factor such as age, disability or location (eg no availability of internet). These exemptions are the same as the current exemptions for VAT online filing.
  • When MTD for incom tax becomes mandatory, there will be an exemption for businesses and landlords with a very small turnover; the level of this exemption has not been set.

Do I need to do anything right now?

For VAT registered businesses, you should discuss your transition to Digital Tax with your accountant.

All of the packages available through Accountly are already ready for MTD reporting and fully compliant, so you won’t need to change anything before the commencement date in April 2019.

  • Consider the possibility of a digital exclusion exemption
  • If you currently use accounting software it may need to be upgraded to ensure compliance. If you are considering acquiring software, talk to us first – software is included with all of our packages.
  • If you currently maintain records on a spreadsheet you’ll need to acquire software which will allow returns and updates to be made directly from the spreadsheets. Our accountants can help with this.
  • If you currently maintain records on paper, your processes or systems will need to change. You will need to acquire and use appropriate software in order to comply with the new regulations.