MTD for the new tax year
How a bookkeeper can help you manage MTD.
MTD (Making Tax Digital) is a government initiative to digitalise the UK tax system.
Introduced in 2019, developments at the beginning of the 2022 tax year saw MTD extend to include VAT for businesses.
With VAT return deadlines looming, many businesses have difficulty understanding MTD and its implications.
At Rosemary Bookkeeping, our experts are well-versed in online systems and financial processes.
That’s why we’re here to share everything you need to know about MTD for the new tax year.
Refresher: What is MTD?
MTD has two core components:
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Replacement of paper-based records
MTD requires businesses and organisations (including those with property-based incomes) to keep digital accounting records.
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Using compatible software to submit tax returns and updates to HMRC
The government will remove the current online tax services when businesses register for MTD.
They will require businesses and organisations to use software which is compliant with their API (Application Program Interfaces) to submit relevant updates and returns to HMRC.
MTD Timeline
- 1st April 2019: MTD has been in place since this date for the majority of VAT-registered businesses above the tax threshold of £85’000+ turnover. These included partnerships, sole traders, limited companies, non-UK businesses registered for UK VAT, and charities and trusts.
- 1st October 2019: There was a six-month deferred start date to support more complex businesses.
- 1st April 2022: MTD became mandatory for all VAT-registered businesses and organisations.
Upcoming Implementations
Making Tax Digital was initially scheduled to become mandatory for income tax in April 2024. However, in December 2022, the timeline for compliance was revised.
- Starting from 6 April 2026, those with an annual gross income exceeding £50,000 from self-employment and property letting will be required to comply.
- From 6 April 2027, the rules will apply to individuals with an annual gross income of over £30,000 but less than £50,000 from self-employment and property letting.
- Lastly, from 6 April 2028, the compliance will extend to those earning between £20,000 and £30,000 from self-employment and property letting.
Eligibility for MTD
Even if you aren’t legally obligated, you have the option to voluntarily follow the MTD rules if you choose to do so.
To identify individuals who need to comply with the MTD regulations starting in April 2026, HMRC will first review all self-assessment tax returns submitted for the 2024/25 tax year.
Consequently, if you file your tax return for that year by the deadline of 31 January 2026 and your income from self-employment and/or rental income surpasses £50,000, you can expect to receive a notification letter from HMRC in February 2026 informing you of your obligation to comply with MTD beginning 6 April 2026.
The coming changes and how they affect your business
MTD legislation already means you must have completed your ITSA through MTD-compatible software.
If you were not already doing so, you’re now required to keep digital tax records and submit this information to HMRC through an MTD-compatible software when conducting your self-assessment tax returns.
Exceptions
If your business has received an MTD exemption, it will still be in effect.
These can be caused by factors such as:
- Age, a disability or where you live
- You object to using computers on religious grounds
- Any other reason why it’s not reasonable or practical
To check if you are eligible or apply for exemption from MTD, you can find guidance on how to do so via the HMRC website.
If you’re concerned about the impact of MTD on your business, you can read more about its effects here.
MTD’s benefits:
- It can reduce or even eliminate paper-based or manual tax processes. This allows you greater accuracy in tax returns and reduces time spent on administration. It also gives you more time to maximise your business opportunities, productivity and profitability.
- If you opt to use cloud-based software, you’ll see in real-time what is happening in your books and have better control over your finances, allowing you to stay up-to-date and make informed business decisions.
- Using compliant digital software means submitting information to HMRC is far simpler and less stressful.
- Some accounting software links directly to your bank account. Further reducing the ‘paperwork’ and time spent filing taxes.
- Digital software provides you with real-time management information so you can see how your business is performing.
So, if you have not already done so, you need to start weighing your options for MTD-compliant software.
Why now?
The new financial year is the best time to reset how you manage your books.
This period is notably less disruptive, as things are changing already.
By introducing new systems to work smarter, you keep your business information secure and make things easier to manage going forward.
How Rosemary Bookkeeping can help
We understand that making the jump to digital can be scary and daunting.
But, it’s not as bad as it seems – especially with the help of an expert bookkeeping service like Rosemary Bookkeeping.
Expertise
The benefit of changing to MTD is that we’ve had around four years of experience working with it.
With a professional bookkeeper from Rosemary Bookkeeping to help you, making your tax digital is simple.
We have been operating MTD for VAT submissions since its inception in 2019 and know its processes inside and out.
Going digital may be a scary prospect. Using a bookkeeper, your tax may be digital, but your bookkeeping experience isn’t.
Software Support
We will assist if you need to acclimate to the software or do the work for you.
We also send generated returns directly from the software, so you have a well-kept and organised backlog of your records.
Our bookkeeping experts are trained to work digitally using MTD-compliant software like Xero, QuickBooks and Sage and are a real-life human presence that can reassure and guide you through the process, so you’re not going it alone.
As Rosemary Bookkeeping is well-versed in MTD and online services, we can advise which software would be best for you and often offer competitive prices for software subscriptions.
Additionally, we offer an online exchange of documents, so you’ll be able to upload photos or scans of documents so that we can process them on the bookkeeping software.
We also use Apps like AutoEntry or Hubdoc, which not only attach documents directly to the record on the software but also automate some bookkeeping processes – saving you valuable time and money.
Struggling with your bookkeeping?
The new tax year is a busy and stressful time, particularly hot on the heels of January Self-Assessment tax return deadlines.
We also know that keeping track of your finances isn’t easy, especially when also trying to figure out MTD legislation and new software.
If you had a stressful time sorting your ITSA, the new tax year that swiftly follows may be a real cause for concern.
By contacting the professionals, you receive personal and expert support on all aspects of bookkeeping.
We love bookkeeping, but we know it’s not for everyone. So, leave the stress behind by leaving your books to the experts today.
Find your nearest Rosemary Bookkeeping business today to see how we can support you ahead of the new tax year.
