August 23, 2022
by  Josh Sab

Making Tax Digital - What you need to know.

MTD is a government initiative to transition companies from traditional paper records to an online system.

Beginning in 2017 the service has slowly been opened to businesses, the self-employed and landlords. In conjunction with platforms such as Free Agent, Xero and Quickbooks. taxpayers upload their income and expenditure at least 4 times a year. By inputting all their sales and expenses into the system, transparency increases and this allows HMRC to offer far more precise estimates of tax liabilities. 

Below I have distilled some key dates and facts given to us by the government:

- From 1 April 2022, all VAT-registered businesses are required to use MTD for VAT to show how much revenue they generate. 

- Paper records and VAT submissions are full of errors! – a poll by YouGov found that 61% of businesses admitted to losing receipts and making mistakes during the manual process of inputting and calculating data.

- MTD is designed to offer a way of reducing the time cost for business administration and tax filing.

- In March 2020, an independent study was conducted on the impact of MTD on record keeping and error management for small businesses. It found that the firms making use of the system for VAT with integrated accounts software spent less time on tax.

Exemptions as confirmed by the HMRC:

- The 'digitally excluded', or those who cannot use digital tools for reasons of religion, age, disability, remoteness, or any other reason

- Charities (not including subsidiaries)

- Unincorporated businesses and landlords with annual sales below the £10,000 threshold

In the future, MTD will continue to be rolled out and the government's current stance is that all self-employed businesses and landlords with an annual income of £10,000 will need to transfer to the system by 6th April 2024.


Similarly, Corporation Tax will eventually follow suit but for now, the government has only said that they won't mandate the change before 2026.

Of course, as we announced in last week's blog Praddy Financial Consultancy was recently commended for our proactive efforts in helping our clients familiarise themselves with Xero, an important accounting software. If you are curious or are soon to need assistance with your business you can reach us at office@pfconsult.co.uk, via the Contact page or on any of our socials. 

Stay tuned for next week’s blog where we will be talking about Free Agent, one of the most popular pieces of software used by landlords in this new MTD world.

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