Making Tax Digital

Making Tax Digital: Everything Businesses Need to Know

Making Tax Digital (MTD) is transforming how businesses and individuals manage their tax obligations in the UK. Introduced by the UK Government, MTD aims to modernise the tax system, improve accuracy, and save businesses time and money.

MTD now covers both VAT and Income Tax, with phased deadlines for different types of taxpayers.

Making Tax Digital for VAT

Effective from 1st April 2019, all VAT-registered businesses with taxable turnover above £90,000 must use HMRC-approved software to keep their tax records digitally. This applies to all businesses trading in the UK, including international organisations.

Key points for VAT compliance:

1. Digital Record-Keeping
   Manual VAT records are no longer acceptable. Businesses must use software that connects to HMRC through an API.
2. VAT Submissions
   VAT returns must be submitted digitally. While a 12-month soft landing period allowed some flexibility initially, full digital submission has been required since 1st April 2020.
3. Brexit Considerations
   Businesses trading between the UK and EU need to stay informed of changes in VAT legislation. Outsourcing experts ensures compliance and reduces risk.

 

Alongside bookkeeping and tax compliance, Goodwille also provides outsourced payroll services to ensure your employees are paid accurately and on time while keeping you fully compliant with UK regulations.

 

Making Tax Digital for Income Tax

MTD for Income Tax (MTD for IT) is a new system affecting sole traders and landlords. It requires digital record-keeping and quarterly updates to HMRC.

Who Needs to Comply?

You must comply with MTD for IT if:

• You are registered for Self-Assessment
• You earn income from self-employment, property, or both
• Your total qualifying income exceeds thresholds set by HMRC

Phased Implementation for MTD for IT:

• April 2026: Sole traders and landlords earning over £50,000
• April 2027: Sole traders and landlords earning over £30,000
• April 2028: Sole traders and landlords earning over £20,000
• General partnerships: Deadlines yet to be confirmed

Requirements Under MTD for IT:

1. Digital Record-Keeping
   Income and expenses must be kept digitally in MTD-compliant software.
2. Quarterly Updates
   Instead of a single annual return, businesses submit four updates per year.
3. Final Declaration
   After the quarterly updates, a final declaration confirms total income and tax due.

Benefits of MTD for IT:

• Greater visibility of tax liability throughout the year
• Simplified record-keeping and automation
• Improved accuracy and efficiency

What MTD Means for Businesses

To comply with MTD, businesses need HMRC-approved software. Key considerations:

• Ability to create, store, and correct digital records
• Capability to send quarterly updates and final declarations
• Integration with HMRC and existing financial systems
• Authorization from clients if acting as an agent

The Costs
Transitioning to MTD often brings upfront expenses. Businesses may need to purchase or subscribe to software, upgrade IT systems, invest time in staff training, and pay for extra accountancy support. For many, the early stages also bring stress and uncertainty as new processes are put in place.

The Benefits
Once established, the benefits start to outweigh the challenges. Businesses report quicker VAT submissions, fewer errors, and increased confidence in their compliance. Over time, digital record-keeping also streamlines wider financial processes and provides better visibility of business performance.

 

Popular options include platforms like Xero, which automate bookkeeping, connect bank accounts, and simplify tax submissions.

How Goodwille Helps Businesses Comply

Goodwille specialises in helping international businesses expand into the UK while remaining compliant with MTD. Their team can handle:

• Bookkeeping and digital record-keeping for VAT and Income Tax
• Tax compliance and HMRC submissions
• Setting up subsidiaries, offices, and back-office operations

With over 20 years of experience, Goodwille allows business owners to focus on growth while ensuring full compliance with UK tax regulations.

Key Takeaways

• MTD is mandatory for VAT and will progressively include Income Tax
• Digital record-keeping and quarterly updates are required
• Outsourcing compliance ensures smooth transitions, reduces risk, and frees up resources
• Businesses that fail to comply may face fines or penalties

For more information about how Goodwille can help your business navigate the Making Tax Digital landscape, visit www.goodwille.com.

Take the first step towards digital tax compliance today!