Making Tax Digital for VAT and Digital Bookkeeping

What is Making Tax Digital?

MTD was announced in 2015. It is an initiative by the UK government and HMRC to make tax filing electronically easier, faster for people to record and understand. 

If you pay taxes and file a return in the UK, then you are affected by MTD. It includes individuals, businesses, landlords, nonprofits and more. If you file taxes, use an accountant or get an income from any other place other than standard PAYE payroll, MTD matters to you. 

HMRC have clearly stated MTD would NOT affect pensioners, people who are paid through PAYE/payroll or who have a secondary income less than  £10,000.

MTD is a new approach to updating, reporting and filing tax information. For individuals, self-assessment tax returns will become a history. It is compulsory for all businesses and individuals to use MTD. There is good online accounting and bookkeeping services software that helps integrate directly with MTD. 

As a bookkeeper service, you can grow your business by ensuring your practice is ready and taking your clients to HMRC- recognised software. 

Following are the benefits of using MTD:

1.  You will get a centralised view of your tax information, entitlements, liabilities so you have a clear idea of how much you owe at a certain point of time. 
2. It reduces errors and increases accuracy in reporting and filing of taxes. 
3. You get an up to date understanding of how much you owe and the tax payments you need to make. 
4. You will get more time to grow your business as updating HMRC with your business financial information will become faster and easier. 
5. There is a low chance of compliance checks and audits by HMRC.
6. You’ll get digital nudges from HMRC to ensure you’re reporting correct information at the right time. 
7. Online billing means you can straight away pay your tax.  

All VAT registered businesses must keep and preserve records and accounts.