Making Tax Digital (MTD) isn’t a new concept, but it will become relevant for many more businesses over the next couple of years.
From April 2022, Making Tax Digital will rollout to over 1 million more VAT registered businesses. It’s the next stage in the government’s 10 year strategy for MTD, soon followed by Income Tax Self Assessment in 2023. Here, Helen explains what MTD is and how it can help your business become more efficient…
What is MTD?
MTD is HMRC’s vision for a modern, more simple tax system, which reflects the changing face of business in the 21st century. MTD allows real time, digitalised records to be submitted throughout the year. This allows HMRC to make their tax records more efficient and reliable, and to recoup some of the estimated £10bn of VAT that was lost during the 2018/2019 tax year.
As it currently stands, clients above the VAT threshold of £85k must file VAT returns online using HMRC-recognised MTD software, such as Xero, while for those under the threshold, it’s optional. However, from April 2022 the requirement will be extended to all VAT-registered businesses.
Why Would a Business Voluntarily Register For VAT?
There are a number of reasons why your accountant may advise that you voluntarily register for VAT, one of the first being that as a new business you may be forecast to meet or exceed the threshold over your first year of trading, HMRC expects that you will register if you suspect you will go over the threshold.
You must register within 30 days of your business turnover exceeding the threshold. If you register late, you must pay what you owe from when you should have registered – and you may have to pay a fine.
How MTD Can Benefit Your Business
As well as benefiting HMRC, your business can benefit from MTD as you will have a greater understanding of your financial situation at all times. By keeping accurate digital records, we will be able to view these at your strategic calls, understanding your cash flow and being able to plan and grow your business with more accurate information at our fingertips.
Keeping digital records will help to reduce errors, for both your business and HMRC and allow them to be flagged and corrected more easily. MTD will also allow HMRC to rectify errors easily, between their different departments, without the lengthy process we currently have of letters being sent and long hours on hold to resolve tax queries – giving you even more time to spend on your business!
We are a Silver Partner of Xero and by using this software, we make sure that your business is MTD compliant, allowing us to get on with the real job of helping you and your business develop and feel in control of your finances.
Ensure Your Compliance Now
Making Tax Digital is a significant change in the way business finances will work in the future but the good news is that once we have set this up, it will be an easy and stress free manner of dealing with your tax. Book a call with us to discuss MTD for your business – email us info@insightfinancesolutions.com or drop us a message here.