What is Making Tax Digital?

HM Revenue & Customs introduced Making Tax Digital (MTD) as part of its move towards a fully digital tax system. The aim is to make tax administration more efficient by keeping tax records online, improving the accuracy of submissions and giving businesses access to their tax information in one secure place.

Making Tax Digital helps reduce errors, minimise overpayments and underpayments, and lowers the risk of HMRC penalties by encouraging accurate digital record keeping and timely tax submissions.

Who Will This Affect?

Businesses and individuals whose taxable turnover exceeds the current VAT registration threshold are required to submit VAT returns using HMRC-recognised Making Tax Digital compatible software.

Businesses below the threshold may also choose to register voluntarily and benefit from digital record keeping and streamlined tax reporting.

As the Making Tax Digital programme continues to expand, additional taxes and more businesses will gradually be brought into the scheme, making digital accounting an essential part of future tax compliance.

Businesses are also required to maintain digital records and submit regular updates through compatible software. While spreadsheets can still be used in some circumstances, they must be connected to approved bridging software to comply with HMRC requirements.

How Will It Affect Your Business?

HM Revenue & Customs does not provide its own accounting software but instead works with approved software providers that meet Making Tax Digital requirements.

As experienced accountants in Wellingborough, we recommend cloud accounting solutions such as Xero and QuickBooks, which make it easier to manage your bookkeeping, maintain accurate financial records and submit VAT returns directly to HMRC.

Using Making Tax Digital compatible software provides benefits including:

• Accurate digital record keeping.
• Faster and more efficient VAT submissions.
• Real-time financial reporting.
• Improved visibility of your business finances.
• Reduced risk of errors and HMRC penalties.

Preparing for Making Tax Digital

There are several important steps businesses should take to prepare for Making Tax Digital:

• Check whether your business falls within HMRC's Making Tax Digital requirements.
• Move your accounting records to compatible cloud accounting software.
• Ensure historical financial data is transferred accurately.
• Keep digital records updated throughout the year.
• Submit VAT returns using HMRC-approved software.

If you intend to manage your bookkeeping internally, we recommend receiving appropriate software training so you can take full advantage of real-time reporting and improved financial management.

Alternatively, many businesses choose to outsource their bookkeeping and Making Tax Digital responsibilities to save time and ensure ongoing compliance.

As Platinum Partners of Xero and experienced users of QuickBooks, we can set up your cloud accounting software, migrate your existing records, maintain your bookkeeping and ensure all Making Tax Digital Wellingborough submissions are completed accurately and on time. We also provide regular management reports and proactive advice to help your business grow with confidence.

If you have any questions about Making Tax Digital or would like support moving to cloud accounting software, contact our team today.