Making Tax Digital (MTD) is the new government strategy to digitalise HMRC and the tax system. It should make tax easier to process, improve accuracy and integrate a range of systems, ultimately ensuring HMRC collects all taxes owed.
Making Tax Digital for VAT was the first part of the strategy and is now standard practice. Making Tax Digital for Self-Assessment is the next step. It will allow HMRC to collect income tax quicker and more accurately, making errors and tax avoidance trickier.
Businesses will need to use compatible software to keep their records, this software will automatically connect to HMRC via the Government Gateway and feed the data to HMRC directly. Much like the new process of MTD for VAT.
Initially it will affect all individuals who are self-employed and receive a gross annual income of £30k+, this includes property rentals.
Quarterly updates will be sent to HMRC via the software, meaning that the accounts will need to be completed every three months, rather than annually, like many sole traders.
This will be a big change for many people, understanding the new processes, keeping accurate and up to date accounting records, using and understanding new software.
Even though it is not due to come into effect until 2026 businesses should be preparing and thinking about how it might impact their work. Do you have time to commit to the accounts, the knowledge to prepare them?
Balancing Act can always help, whether it is providing the book-keeping, helping with the initial set up or offering ongoing support, please do get in touch.
Here are some helpful links:
