What is Making Tax Digital?
Everything you need to know about MTD and how having a bookkeeper helps.
Making Tax Digital (or MTD) is part of HMRC’s ongoing initiative that has been underway since April 2019 to digitalise the UK tax system.
So, when and how will MTD affect your business? And how should you go about paying it? In this blog post, the experts at Rosemary Bookkeeping have all the answers.
What is MTD?
MTD has two core components:
- Replacement of paper-based records and a requirement for businesses and organisations (including those with property-based incomes) to keep digital accounting records.
- Using compatible software to submit tax returns and updates to HMRC – The government will be removing their current online tax services when a business registers for MTD and will require businesses and organisations to use software compliant with their API (Application Program Interfaces) to submit relevant updates and returns to HMRC instead.
MTD Timeline
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.
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- 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.
The changes and how they affect your business
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, reduces the time you spend on administration, and gives you more time to maximise your business opportunities, productivity and profitability.
- In the case that you opt to use cloud-based software, you’ll be able to see in real-time what is happening in your books and have better control over your finances, allowing you to make up-to-date and well-informed business decisions.
- Using compliant digital software means that submitting information to HMRC is far simpler and less stressful.
- Some accounting software links directly with 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.
How Rosemary Bookkeeping can help with Making Tax Digital
We understand that making the jump to digital can be scary and daunting. But it’s not as costly or difficult as it seems, especially with the help of an expert bookkeeping service like Rosemary Bookkeeping. The benefit of changing to MTD now is that everybody else has already had years of experience working with it.
With a professional bookkeeper from Rosemary Bookkeeping to help you, making your tax digital is a very simple process.
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, but by using a bookkeeper, your tax may be going digital, but your bookkeeping experience isn’t. We will assist however you need to get accustomed to the software, or simply do the work for you and make the process of sending returns to HMRC straightforward. We will also send generated returns directly from the software so that you have a well-kept and organised backlog of your records.
The main drawback of digital services like Xero and QuickBooks is that they depend on your financial knowledge and ability to work through MTD yourself. Our bookkeeping experts are trained to work digitally using MTD compliant software like Xero and QuickBooks, and Sage, but 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 also offer advice on which software would be best for you, and often offer competitive prices for software subscriptions.
Additionally, we also 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.
To start receiving expert help and advice from your local bookkeeping experts, find your nearest Rosemary Bookkeeping business today for your free, no-obligation quote.
