Making Tax Digital
What is MTD?
Making Tax Digital (MTD) is a government initiative to make it easier for people and businesses to get tax right by keeping and submitting digital records. It makes the tax system (and how it’s administered) more effective, more efficient and easier to understand.
How does it affect me?
The first stage of MTD was introduced in 2019. It requires VAT-registered businesses with a taxable turnover above the VAT threshold of £85,000 to keep digital records and use software to submit their VAT returns.
Self-employed business owners and landlords with annual business or property income above £10,000 will need to follow new MTD rules for income tax from 6 April 2024.
A consultation has been published on MTD for corporation tax and you’ll also have the chance to take part in a pilot. No one will have to use it before 2026.
Your MTD-ready accounting softwareOnce you’ve signed up to MTD, FreeAgent accounting software automatically generates your MTD-compatible VAT returns and lets you submit them directly to HMRC.
What are the benefits of MTD?
Better use of information
You won’t have to give HMRC information twice. Employers, banks, building societies and other government departments will all feed their information into one place.
Tax in real time
HMRC will deal with anything affecting tax as close to real time as possible, to help prevent errors and stop tax due or any repayments you owe building up.
A single financial tax account
You’ll see a comprehensive financial picture in your digital account. It’ll be like online banking but with a personalised picture of your tax.
Digital contact with customers
Business owners will get prompts, advice and support through webchat and secure messaging.
Making Tax Digital (and simple) with FreeAgent
From April 2022, all VAT-registered businesses will need to keep digital records and submit VAT returns to HMRC using compatible software - regardless of turnover. FreeAgent could help you with this, and it’s free with our business current account (eligibility criteria apply).
Making your business more digital
It’s not just the tax system that can reap the benefits of going digital. If you don’t have a website for your business, you might be missing out on new markets, and if you do already have one, have you considered other ways to do business online, like offering workshops or online events?