Making Tax Digital (MTD) is a government initiative designed to help businesses and individuals declare their tax to HMRC digitally. Whilst part of Making Tax Digital was pushed back 12 months into 2022 due to the Covid-19 pandemic, it is very much still a priority of the Government. In July 2020, the government published a ten-year vision for tax administration in the UK, central to this being a fully digital tax system, closer aligned to real-time.
Previously, all VAT registered businesses with turnover of greater than £85k have had to move their accounting records onto a MTD compatible system. From April 2022, this will apply to ALL VAT registered businesses, not just those with a turnover above the VAT registration threshold.
What does this mean? It means that you will not be able to input your VAT return directly through the HMRC website, you need to submit your VAT return through a compatible software or through a bridging software that will link any excel records to your VAT return. This will apply to everyone that submits a VAT return after the 1st April 2022.
The good news is that we have a year to prepare and we can help you with this. We have thoroughly tested a lot of different software with the original VAT MTD deadline so we know what to suggest to you. If you need any help or want to understand the impact of this change then please get in touch.
The bad news is that this is just the start of the MTD journey for us all. The next phase has a deadline of 1st April 2023 (at the time of writing) and will require rental income, sole trade income and partnership income to be reported quarterly to HMRC (if your income or combined income is over £10k). So instead of just reporting this income on your personal tax return once a year, you will have to report quarterly to HMRC. We will be talking to all our clients that will be affected by this change over the next few months so we can help you prepare for this next step on HMRC’s digital journey.