Making Tax Digital – Update July 2020

Things have been a bit quiet about Making Tax Digital and the timescales that had been announced have been delayed and even paused due to the Covid-19 pandemic. However, the government made an announcement on July 21, 2020, and provided some new timelines for going forward with MTD.

What is Making Tax Digital?

Making Tax Digital (MTD) is the government’s plan to make it easier for individuals and businesses to know what tax they have to pay before the end of the year. Businesses will need to submit their tax information to HMRC digitally.

What’s the latest on MTD?

Currently, only those businesses that have had to register for VAT due to reaching the £85,000 turnover threshold, have had to file their VAT returns through MTD. Live pilots have been continuing to be run to help HMRC get the system in place for the remaining taxes.

HMRC are going to be ready to continue with getting all businesses and individuals filing their taxes through MTD starting with those businesses who have voluntarily registered for VAT. From April 2022 all VAT registered businesses will need to file their returns through MTD. In April 2023, all self-employed businesses and landlords with business turnover above £10,000, will need to follow MTD for filing tax returns and they will need to do this quarterly.

How can I get ready for MTD?

Even if you don’t need to file your taxes with HMRC through MTD yet, you can start to get prepared so that when you do need to follow the guidelines, you are already up and running.

1) Start using MTD Compliant software like QuickBooks Online – now.

Keep your accounts on MTD compliant software so that you know the software will be able to file your tax information with HMRC without needing to use bridging software, or change how you do your accounts. This will help to reduce your stress and panic, because by the time you need to file your taxes with HMRC through MTD, you are confident in using the software and already all set up.

2) Get into the habit now of attaching copies of invoices/receipts to your transactions within the accounts software.

Part of following MTD and filing your accounts, is ensuring that you are sending digital information to HMRC – they will no longer accept paper records. You need to have all of your transactions digitally, and have an audit trail for what those items are. You can do this by ensuring that you attach a copy of any invoices/receipts to each transaction in the software. Depending on your accounts software, you can often take photos with the app on your phone/tablet, enter a small amount of information and save it – this then puts the transaction into your accounts and attaches a physical copy of the invoice/receipt to it. You can also use a third party software like AutoEntry which will not only attach a physical copy of the invoice/receipt to your transactions, but it also stores your paperwork digitally for you! By ensuring you are attaching a physical copy of the invoices/receipts to your transactions, you won’t need to store the paperwork, because you will have a copy stored digitally.

3) Keep watching for announcements!

This is probably the simplest of the steps, and the easiest one to do. Keep an eye on our Facebook page and our blog as we will share any further updates about Making Tax Digital so that you know when you need to start following the guidelines. You can find our Facebook page here: https://www.facebook.com/ihelmenterprises.