Making Tax Digital

The government's Making Tax Digital (MTD) programme aims to make it easier for people to pay tax as and when they need to, reduce avoidable errors and help combat fraud, evasion and abuse.

MTD for VAT has already begun for businesses over the £85,000 VAT threshold. From April 2022 the scheme will be extended to all businesses paying VAT.

From April 2023 MTD for Income Tax will take effect and include business or property income chargeable to income tax over £10,000.

For a free initial meeting to discuss how we can help you contact us online or call us on T: 023 9248 4356T: 023 9248 4356

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Digital Accounting for Businesses  

The introduction of HMRC’s Making Tax Digital (MTD) for VAT from 1 April 2019 (or 1 October 2019 for businesses with more complex requirements to comply) brought a fundamental change to the way businesses submit their VAT returns.

VAT registered businesses with a turnover exceeding the VAT threshold (currently £85,000) are now required to record transactions digitally and file their quarterly returns using compliant software.  From April 2022 the scheme will be extended to all businesses paying VAT.

For businesses registered for MTD, VAT submissions must be made using HMRC-compliant software.  Not all software will be compatible with HMRC’s new system and all transactions should be ideally stored within the same software that is making the submissions.

Businesses should note that they will not be able to submit their VAT return if they do not have compatible software when they sign up for MTD.

Also, businesses that pay VAT by Direct Debit cannot sign up in the 15 working days leading up to, or the 5 working days after, sending a VAT Return.
It is important therefore that all businesses affected should ensure they have adequate software and processes in place to comply with the new regulations. Copy and pasting or manually copying data across from one system to another will not be allowed.
Soft-landing period

HMRC will allow a “soft landing period”, for businesses to have in place digital links between all parts of their functional compatible software. During this period of time only, where a digital link has not been established between software programs, HMRC will accept the use of ‘cut and paste’ or ‘copy and paste’ as being a digital link for these VAT periods.

The soft landing period for was due to end on 31 March 2020. However, with Coronavirus having a significant impact on businesses throughout the UK, the soft landing period will now extend and end for VAT periods starting on or after 1 April 2021.
Making tax digital for income tax
Taxpayers who file self-assessment returns for business or property income of more than £10,000 a year will be brought into the MTD programme from April 2023. Read our special report on the announcement here
HMRC has updated its guidance for those wishing to join the scheme voluntarily. The guidance provides details on who can follow the rules; when to follow the rules; keeping digital records; how to sign up; and sending updates using software.
How we can help
If you are currently using a manual or desktop bookkeeping system we would urge you to think about changing to an online accounting system.  Not only will this ensure you have the right software in place when more frequent reporting to HMRC takes effect but offers many other benefits for your business. 

From our experience of working with businesses who use online accounting software, two products we would strongly recommend are Xero and QuickBooks Online.  We can provide versions specifically tailored to meet the needs of your business and offer help with the initial set up and training.

Online accounting provides you with the right tools to manage your finances more efficiently.  Used correctly, it gives you an overall, detailed and up-to-date view of your business for better decision-making, as well as ensuring compliance with the new reporting regulations.

The software is available by monthly subscription.  Both Xero and QuickBooks Online offer subscribers constantly updated systems which guarantee that you are always using the latest version. 

If you currently use a desktop version of Sage or Quickbooks, Xero offers free conversion of two years' worth of accounting data. It is possible to use the same service to convert to QuickBooks Online, but this is not funded by QuickBooks and hence there is a charge. However for users of the desktop version of Quickbooks wishing to convert to the online version, all existing accounting data can be transferred free of charge. Please note that prices for the conversion process are subject to change as this is a third party service.

For more information or to arrange a free demonstration, please contact Martin Southern by email at or tel 023 9248 4356.

You can also find more information at our cloud accounting page.

Read our cloud accounting case study.


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