HMRC are aiming to become one of the most digitally advanced tax administrators in the world. They have made significant changes to the way our tax system works to make it more efficient, effective and less complex in order to achieve this.
The HMRC carried out live pilot testing in order to prepare for MTD. They invited some businesses to participate by keeping digital recordings and providing the HMRC with updates in order to develop the MTD service. A lot of effort and research has gone into the system and the service is already being used for many businesses.
MTD for VAT registered Businesses
MTD was introduced by the Government in April 2019 initially for VAT registered businesses. Businesses who are currently VAT registered are required to follow the new rules by keeping digital records and using software to submit their VAT returns. For those businesses below the VAT threshold it is not essential to join the service yet but they can join voluntarily if they wish.
MTD for Income Tax
If you are self-employed and your income exceeds £10,000 per annum you will need to follow the MTD rules from your next accounting period from 6 April 2024.
Is MTD going to cause more work for me?
The introduction of MTD was brought into practice due to all the tax errors which were being made. According to HMRC between 2018-2019 errors in tax, cost the Exchequer £8.5 billion. Not only will MTD help to save money but it will also encourage businesses to modernise their software and become more efficient with the latest technology. New updated software will actually save time and money for businesses in the long term. Some businesses are currently still using spreadsheets to keep up with their accounts but there is plenty of room for human error when using this method and a lot of time goes into keeping track of everything. Automations and digital software are now so advanced that errors are unlikely and less time can be spent on your accounts so that you can concentrate on growing your business.
Will MTD cost me more money?
It is true that some businesses may need to advance their technology in order to comply, but businesses can claim costs back for software against their tax. Sage Software is available to purchase on our website, starting at £12 per month (excl VAT), we offer competitive discounts and offers, so please get in touch.
If you already have Sage 50 Cloud Accounts or Sage Business Cloud Accounting then these are compatible platforms for MTD. If you are using older versions of Sage then you may need to upgrade in order to comply.
Sage Accounts Solutions are here to help you prepare for MTD, if you have any questions please get in touch and we can assist you to make the transition as smooth as possible.