A modern approach

Making Tax Digital

WHAT IS MAKING TAX DIGITAL?

Making Tax Digital, or MTD for short, is a Government scheme that’s making fundamental changes to the UK tax system.

It’s part of HMRC’s aim to become “one of the most digitally advanced tax administrations in the world”, and it’s gradually being implemented for different taxes and different types of businesses.

The first compulsory stage of the scheme, MTD for VAT, began in April 2019, meaning most VAT-registered businesses must keep digital records and file their returns using software that’s compatible with HMRC’s systems. 

Following this, more taxes are likely to be brought into the scheme, including income tax and corporation tax, and more businesses will be changing their accounting processes.

For many, that will mean changing from spreadsheets or desktop software to more modern online tools.

We encourage all of our clients to use cloud accounting software, not just as a way of meeting the requirements of MTD, but to give them focused, responsive insights on their business performance.

THE MTD TIMELINE

A lot has happened since MTD was first announced in 2015, but as early adopters of digital accounting technology, we’ve kept a close eye on the way the scheme has developed and what that means for our clients. Here’s what’s happened so far.

14 DECEMBER 2015

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MTD FIRST ANNOUNCED

HMRC publishes a paper detailing a five-year plan to move to a fully digital tax system.

15 MARCH 2018

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INCOME TAX PILOT OPENS

Self-employed individuals can opt to use digital tools to report their income tax.

16 OCTOBER 2018

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VAT PILOT GOES PUBLIC

The pilot version of MTD for VAT opens to the public on a voluntary basis.

1 APRIL 2019

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MTD FOR VAT BECOMES LAW

Most VAT-registered businesses are required to start reporting under MTD.

1 APRIL 2023

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EARLIEST DATE FOR OTHER TAXES

Other taxes, such as corporation tax and income tax, could be brought into MTD.

14 DECEMBER 2015

"

MTD FIRST ANNOUNCED

HMRC publishes a paper detailing a five-year plan to move to a fully digital tax system.

15 MARCH 2018

"

INCOME TAX PILOT OPENS

Self-employed individuals can opt to use digital tools to report their income tax.

16 OCTOBER 2018

"

VAT PILOT GOES PUBLIC

The pilot version of MTD for VAT opens to the public on a voluntary basis.

1 APRIL 2019

"

MTD FOR VAT BECOMES LAW

VAT-registered businesses are required to start reporting under MTD.

1 APRIL 2021

\

EARLIEST DATE FOR OTHER TAXES

Other taxes, such as corporation tax and income tax, could be brought into MTD.

WILL MTD IMPACT YOUR BUSINESS?

Depending on whether or not your business is VAT-registered, you might already be operating under MTD. Either way, most businesses are likely to be included in MTD at some point as it starts to apply to other taxes.

But if you’re already prepared with effective digital accounting systems, as Gains’ existing clients are, you probably won’t notice the change at all. Many of the main online accounting packages are set up to comply with MTD requirements for digital reporting, so you can keep your records with ease, and seamlessly report them to HMRC. 

Adopting digital workflows and cloud technology should make for an effortless transition to MTD, as well as enabling your business to fully utilise its existing resources to their full potential. 

VAT-registered

If you’re running a VAT-registered business, it’s likely you’re already operating under MTD rules. That includes keeping your VAT records digitally, as well as filing quarterly VAT returns using software that connects with HMRC’s API. 

You’ll need to keep meeting those requirements, especially as HMRC’s light-touch approach to penalties and soft-landing period for certain MTD rules comes to an end in April 2021.

Not VAT-registered

If your business is not VAT-registered and has a turnover that’s lower than the VAT threshold, you don’t have to comply with MTD just yet – but change could be on the way.

MTD for income tax and corporation tax could be implemented as early as April 2021, so it makes sense to start setting up or updating your digital systems now.

How can online accounting benefit you?

Real-time data

See your data as it happens, giving you an accurate and up-to-date picture of your finances.

Collaboration

Work with us or with your colleagues, by enabling access for multiple users on your account.

Automation

Automate time-consuming tasks, saving time and improving efficiency in your business.

Secure storage

Your data is automatically backed up on the cloud, so it’ll still be there whatever happens to your device.

Work on the go

Log in to your account from any device, without the need for large downloads or software updates.

Connectivity

Link your accounting software with the other apps you use to manage your business seamlessly.

Xero and Receipt Bank

We recommend two main online accounting tools to our clients: Xero and Receipt Bank.

Xero is MTD-accredited and packed with useful features to help your business work more efficiently, including bank reconciliation, financial reporting, automated invoicing, and more.

Receipt Bank can link up to Xero for easy bookkeeping, allowing you to keep track of expenses and invoices on the go, without needing to maintain shoeboxes of paper.

Xero advisor certified
Receipt bank logo

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