What Is MTD?

Making Tax Digital ("MTD") is a new regime for submitting your accounts to HMRC. It requires businesses to have compliant bookkeeping with all data being submitted to HMRC along with the final totals.

Gone are the days when you put totals in boxes.

HMRC now require all the bookkeeping entries behind the totals and in digital format. This means that the source data is dynamically linked to the totals (kinda like a formula adding it all up!). This allows HMRC to examine your transactions. They use Ai and sophisticated systems to look for anomalies that then trigger investigations. These can lead to hidden tax bills, penalties and fines. In plain English "it's time to get your house in order", we've been warned!

 

What Does It Mean For You?

• Digital Record Keeping - Undertaken in "MTD Compliant" Software and reconciled.
• Digital Submissions - Submit VAT (and soon other taxes) direct to HMRC via MTD software.
• Accounts - Now submitted quarterly not annually (more work for the accountant).
• Bank Data - Supplying this is now mandatory (and its used by HMRC to audit you).
• Fewer Errors - Compliant book-keeping reduces errors, omissions and misdeclarations.
• Fast Updates - HMRC can now respond quicker.
• Accountant Interaction - Is now quarterly for almost everyone.
• Accountant Fees - Will now increase due to the increased workload.
• HMRC Fines - Less likely if you comply, but increased if you fail to adhere to MTD deadlines.
• Year End Procedure - A "Final Declaration" will require to be electronically signed by you, confirming all data submitted to date is correct.

 

MTD Key Dates

• From 1 Apr 2019 - All VAT-registered businesses with £85K+ turnover need to file under MTD
• From 1 Apr 2022 - All VAT-registered businesses to file need to file under MTD
• From 6 Apr 2026 - Self-employed & landlords with £50K+ turnover need to file under MTD
• From 6 Apr 2027 - Self-employed & landlords with £30K+ turnover need to file under MTD
• From 6 Apr 2028 - Self-employed & landlords with £20K+ turnover need to file under MTD

Thus, if you are under £20K turnover, for now, you don't have to file under MTD. But we can be sure it's coming!

 

Any Tips On Preparing For MTD?

• Don't delay in appointing an accountant!
• Keep all records & paperwork.
• Forward all paperwork to your accountant when requested.
• Try to avoid cash, get clients to pay electronically (it aids record keeping).

 

Why Accountant Fees Now Rise

• Your job is attended to 5x per year.
• Non vat registered will now see the accountant 4x more py.
• Increased job planning, queries etc resulting in extra job time.

 

How Will This Change Tax Bills?

Instead of getting an annual tax bill, you will see a tax bill estimate each time MTD submission is undertaken. However, you need to remember that year end adjustments and capital allowances will still need claimed and so the HMRC estimate can be wildly out. For a more accurate estimate, why not engage me to do the projected tax bill for you?