Making Tax Digital – does it affect your business?
Making Tax Digital rules came into force in April 2019 – which, for some UK businesses, will mean a big change in the way they file their VAT return. If you’re not sure what Making Tax Digital involves, and whether it applies to your business, this article is for you.
What is Making Tax Digital?
We all know that filing taxes can be a clunky, time-consuming process that’s prone to human error. The government knows this too, and that’s why it has ambitious plans to transform – or, to be more specific, digitise – the tax system to make it easier and more efficient for taxpayers. This initiative is known as Making Tax Digital (MTD for short).
‘Making Tax Digital for VAT’ is part of this transformation, bringing important changes to the VAT process. Under the new MTD for VAT rules, VAT-registered companies and sole traders must now keep digital accounting records, using compatible software. What’s more, the way businesses file VAT returns has changed.
Working out whether MTD applies to your business
If your business is over the VAT threshold of £85k, then you’ll have to comply with the new MTD rules for filing your VAT returns. What this means in practice is you’ll no longer be able to file a VAT return through HMRC’s website; instead, your VAT return has to be filed via an HMRC-approved software package, like Xero, QuickBooks or Sage.
And what if your business squeaks under the VAT threshold? In that case, you won’t be affected by these MTD for VAT changes … yet. But keep in mind that if your turnover goes over the threshold, you’ll be expected to comply. To make sure your business is ready, consider switching over to an HMRC-approved accounting package sooner rather than later – it’ll make MTD compliance easier when the time comes.
Let us help
At Jupp Castle, we’re in favour of anything that makes tax simpler for busy business owners. But, as with any business change, the new MTD processes can take some getting used to. Luckily, we have the team to help.
Our accountants are up to speed on all aspects of MTD, from registering your business with the new system, to using the right software and filing VAT returns. Talk to us about getting your business ready for MTD.