What is Making Tax Digital? (MTD)
And how will it affect my business?
Making Tax Digital (MTD) is a government initiative to modernise HMRC’s tax system, with the aim of making the whole process of administrating tax simpler and more efficient. All of your tax information will be in one place (your digital account), and you will be able to pay tax based on your business activity during the year, uploading and updating your tax account in real time.
If you own a business or are self-employed and you pay income tax, national insurance, VAT or corporation tax, then it is quite likely you will be affected. This means you could be required to keep track of your tax affairs digitally using MTD compatible software, and to update HMRC at least quarterly via your digital tax account.
Eventually, this will replace annual tax returns. It will be a legal requirement, and there will be penalties for non- compliance. Everyone will be allocated a digital account through the current Government Gateway. You’ll need to log into this and update your information every quarter, using digital accounting software. This means that you will need to move from your existing desktop or manual record keeping and onto a cloud accounting package. The Business Bookkeeper can advise you on the software you will need and how to comply with the new quarterly reporting requirements.