As you may already know that since April 2022, it has been mandatory for VAT-registered businesses to comply with the new regulations. Unfortunately, you can no longer submit your VAT return through your existing online account. Instead you’ll need to use compatible software for your VAT returns it is important to note that not using MTD compatibile could result in penalties from HMRC. This blog will tell you everything you need to know in preparation for Making Tax Digital for your business so you don’t miss a trick.
What is Making Tax Digital?
The objective of Making Tax Digital (MTD) is to simplify the process of recording and reporting taxes to HMRC for both individuals and businesses, making it more convenient and streamlined. To comply with the new regulations, eligible businesses are mandated by HMRC to digitally record transactions and use Making Tax Digital compatible software to submit their returns. Despite the new rules, there are no alterations to the standard VAT return deadlines or the information required to be provided. To determine when your next VAT return is due, you can refer to your online VAT account.
What information must be kept digitally?
Your bookkeeping procedures and data storage methods may be impacted by MTD. It is mandatory to maintain electronic records and digital copies of transactions. Additional information regarding which records must be kept digitally can be found on HMRC’s website.
I already keep digital records. What’s different about Making Tax Digital for VAT?
Keeping records and accounts is a requirement for all businesses that are registered for VAT, and a considerable number of them already maintain digital records. However, with the implementation of MTD, it is mandatory to use Making Tax Digital software to submit your VAT return to HMRC. To avoid any penalties for non-compliance, here’s what you need to do to adhere to the new legislation.
Make a plan
It is imperative to establish a concrete plan of action. If you have an accountant who manages your bookkeeping, consult with them to comprehend the implications of the change. For instance, you might need to devise a procedure for exchanging digital records and information. Whether you utilize spreadsheets, manual records, or paper-based bookkeeping, or if you already maintain digital records, you must now use MTD compatible software to transmit your data to the new HMRC MTD portal.
What is compatible software?
To comply with the MTD requirements, you must utilize VAT record-keeping software that is compatible with HMRC systems. This software enables you to maintain and revise records such as receipts and VAT invoices in a digital format.
- The software you choose should possess the following capabilities:
- Preserve and manage digital records as defined in the regulations
- Generate VAT returns utilizing the maintained records
- Communicate with HMRC via a digital connection Certain MTD solutions come equipped with a bridging function that allows you to digitally connect spreadsheet data to HMRC’s system.
Selecting MTD compatible software
Prior to registering for the MTD service, it is imperative to obtain compatible software. HMRC does not provide the software, so you must either upgrade your existing software or obtain new software.At Kenwright Accountants, we work with softwares such as QuickBooks, Sage and FreeAgent which are all easy to use and compatible with Making Tax Digital in HMRC.
Can I still use spreadsheets?
Indeed, if you presently employ spreadsheets to compute your VAT submission, you can utilize the uncomplicated bridging feature to upload and transmit your VAT spreadsheet to fulfill your MTD VAT submission. This is the most straightforward and economical method to ensure MTD VAT compliance. Alternatively, you may opt to utilize the record-keeping capabilities to produce invoices and monitor your expenses. While this method necessitates more effort to establish, it is highly user-friendly once implemented.
Is Making Tax Digital only for VAT?
No! Starting from April 2026, self-employed individuals and landlords earning more than £50,000 will have to maintain digital records and submit quarterly updates on their income and expenses to HMRC through MTD-compatible software. Individuals with an income ranging between £30,000 and £50,000 will be obligated to do so from April 2027.
At Kenwright Accountants we understand the process of Making Tax Digital can feel over whelming. Our professional services provide bookkeeping and accountancy support to self-employed freelancers, consultants and coaches Get in touch today and consider it done.
Our specialist services include Self-Assessment, payroll, Construction Industry Scheme (CIS), Corporation Tax, Company Formations, VAT and Company Secretarial. Find out more by visiting our website: Kenwrightaccountants.co.uk
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