Making Tax Digital
What is Making Tax Digital?
Making Tax Digital, also commonly referred to as MTD, is the UK government’s programme to make it easier for businesses and individuals to get their taxes right. By moving everything online, soon people will be able to digitalise their tax data and submit everything online.
This movement is designed to save the Treasury millions of pounds currently lost to inaccurate accounting. The government have also said this new way of recording taxes will make it easier for businesses and individuals to pay their taxes and keep on top of their finances.
How will this affect you?
The next step in the government’s plan to get people online is to focus on Income Tax Self-Assessment. Also known as MTD for ITSA, this step is all about getting self-employed businesses, landlords and individuals in partnerships online to do their taxes. A slow and gradual process, this threshold is for anyone who has an income of more than £10K per year and everyone will need to have joined by April 2024.
How does it work?
Quite simply, when MTD comes into effect, you will need to have submitted your financial records to HMRC every three months by using MTD compatible software. In order to get online, you’ll need to find a government-approved automated software system, such as Sage, QuickBooks or Xero.
Whilst registration isn’t yet open, it’s wise to get clued up on how to get online so you can be prepared for the move:
When the time comes, you’ll need to do the following:
- A Government Gateway account, user ID and password – If you usually submit your tax return online, you’ll already have one of these
- Your business name
- Your business start date or the date you started collecting property income
- An email address
- Your National Insurance number
- Your accounting period dates
- Your accounting type – e.g. cash or standard accounting
What are the benefits?
Whilst this move may seem daunting to many, the reality is that there are plenty of positives to look forward to:
- Gain a better understanding of how much tax you owe
- Reduce the chance of human error with the ability to keep digital records and submit tax returns online
- Have a better visibility of cash flow
- Have access to technology that can do the hard work for you, meaning you can focus on other tasks
- Get a better understanding of your financial position and performance so you can make smarter decisions
- Know when an accounting mistake has been made sooner rather than later
So, how can we help you?
At Angel Bookkeeping we are here to help you with this transition. We understand more than most how overwhelming it may seem to move everything online, so we can do the hard work for you.
Rather than having to worry about finding a balance between MTD for ITSA and running a business, we can work alongside your business so you can focus on more pressing matters. We offer a wealth of knowledge around MTD for ITSA, so whether you need help with setting it up or wish for us to have all the responsibility, we can offer a flexible service that helps you get your feet.
We have some interesting pieces on MTD for ITSA on our blogs which we hope will answer your questions:
- MTD VAT – What Is Making Tax Digital? Everything Business Owners Need To Know
- MTD ITSA – What Is Making Tax Digital? The Must-Read Guide For Business Owners