What is Making Tax Digital?
So what exactly is Making Tax Digital or MTD? If you have not already heard, it’s a program by the UK government to make businesses and individuals keep accounting records in a digital format in one of the approved softwares and to make quarterly submissions to HMRC. The software links to the HMRC web portal for the submission of VAT and tax returns directly from the software. In most cases bank account feeds can be linked directly to the software. The government says its initiative will reduce the number of errors in submittals and tax due, and make tax administration more efficient and simpler for the taxpayer. Most importantly, this will soon be mandatory for most people. For many, part of the MTD program is already a requirement. Read on to find out more.
What is the Current Status of Making Tax Digital?
From April 2022, MTD for VAT returns became mandatory for all VAT registered businesses. It is no longer possible to submit VAT returns directly on the HMRC website, instead this must be done via one of the approved softwares and the records supporting the return must be kept in an approved digital format. So for many businesses, part of the Making Tax Digital program is now already in force.
What is the Future Timeline of Making Tax Digital?
Below are the remaining phases of MTD yet to be introduced, from these dates accounting records need to be kept in an approved digital format and quarterly updates need to be submitted to HMRC through one of the approved softwares:
- April 2026 – corporation tax
- April 2026 – all self-employed persons with an annual turnover of more than £50,000
- April 2027 – all self-employed persons with an annual turnover of more than £30,000
How Can Xero Help?
Xero is one of the approved softwares. However, it’s much more than that. Xero is considered best-in-class by many businesses and professionals alike. Their prices are competitive and they are continuously adding new features and updates and provide excellent support. If you would like help getting ready for MTD please feel free to read through our services or contact us.
