In April 2019, HMRC introduced the Making Tax Digital (MTD) programme. Currently, businesses with a turnover above the VAT threshold (£85,000) are required to keep digital records and use approved software to submit their VAT returns to HMRC on a quarterly basis. There is a published plan to extend the MTD programme, the current key dates are:
- April 2022 – from this date, VAT-registered businesses with a taxable turnover below the threshold will also be required to follow the MTD rules.
- April 2024 – self-employed businesses and landlords with business or property income above £10,000 per annum will need to follow the MTD rules for Income Tax. Please note that this was originally scheduled to begin in April 2023, but a delay to 2024 has been confirmed.
It is also the government’s intention to extend Making Tax Digital to cover Corporation Tax and a consultation programme relating to this is underway. A pilot scheme is likely to be introduced with the full scheme to follow, possibly in 2026. More information can be found on the government website.
The Making Tax Digital programme has accelerated the adoption of digital and Cloud Accounting systems by many businesses. When first introduced accounting software was purchased and then installed on a computer (or server). The user was responsible for security, installing updates and backing up the data. In recent years, as with many other software products, there has been a shift to cloud-based accounting systems. This brings a number of advantages:
Many of the leading systems provide additional services such as management accounts, credit control, bank reconciliation, budgeting and payroll and are approved to provide real-time filing of VAT returns as required by the MTD regulations.
Choosing and setting up Cloud Accounting can be off-putting, but this is where we can help. We are Xero Silver partners, and have experience of many other systems including Sage and QuickBooks, so can help you find the best solution for your business and then get everything set up for you.