Making Tax Digital is HMRC’s initiative to simplify the way businesses report their income, expenditure and taxes and move it online. This means most businesses, self-employed professionals, and landlords will need to maintain digital records and submit regular information to HMRC using compatible accounting software. It will eventually see the end of the annual tax return.
 
The first wave of Making Tax Digital, beginning April 1st 2019,  is initially focused on VAT registered businesses but will affect almost all businesses in the future.
 
Who does it affect?
 
From April 2019, the first phase of Making Tax Digital was introduced for most businesses above the VAT threshold (currently £85,000). It will be introduced for other taxes and businesses from 2020.
 
What does it mean for VAT businesses?
 
You’ll record and provide the same information that you do already, but you’ll need to keep records digitally and submit VAT returns using compatible software that communicates with HMRC’s systems.
 
Does that mean you need a new system?
 
If you keep paper records, then you’ll need to start capturing information digitally. You may need to move to a new accountancy system, or use ‘bridging software’ to translate the information you hold into the right format. There’s lots of choice on the market for compatible software, but it’s important to choose the most suitable system for the needs of your business.
 
What do you need to do now?
 
If you haven’t done anything about Making Tax Digital yet, contact your accountant for advice. Please feel free to get in touch with us, we are working with all of our existing and new clients to prepare and manage their accounts process to ensure they remain compliant and make the transition seamlessly to the digital tax system.
 
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