What does Making tax digital mean for you?
HMRC want to be recognised as having one of the most advanced digital tax administration systems in the world. To achieve that they are making all businesses switch to digital reporting of their business finances. This starts with businesses that are registered for VAT
VAT-registered businesses with a taxable turnover above the VAT threshold which is currently £85,000 are now required to follow the Making Tax Digital rules by keeping digital records and using software to submit their VAT returns.
VAT-registered businesses with a taxable turnover below £85,000 will be required to follow Making Tax digital rules for their first return starting on or after April 2022.
Making Tax Digital for Income Tax
Making tax digital for income tax is the next step in the move to the digital drive of tax administration.
From 6th April 2024 Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for Making Tax Digital for Income Tax.
If you are a self-employed business or landlord you can voluntarily use software to keep business records digitally and send Income Tax updates to HMRC instead of filing a Self Assessment tax return.
Businesses don’t have a choice about making these changes, the primary legislation for the changes relating to VAT and Income Tax is contained in the Finance (No2) Act 2017 which details how Making Tax Digital will work, there was also secondary legislation for VAT in February 2018, which came into force from April 2019.
Do you need a hand to ensure you are doing everything correctly?
The current penalty system is not clear, this link will take you to the models that were tested.