Making Tax Digital: What It Is And How It Affects UK Finance Professionals

Making Tax Digital (MTD) is a new initiative launched by HM Revenue & Customs (HMRC) which will require companies and individuals to file their tax returns electronically. MTD is a new initiative that will require taxpayers to file their taxes electronically. MTD initiative will begin to phase into effect starting in April 2019, before being fully operational in April 2020. It is the MTD initiative is designed to modernize the tax system, making its operation more productive. It will also aid HMRC to better collect taxes and decrease the amount of error and fraud in the tax system. But it is clear that the MTD initiative will have a major influence on the way UK finance professionals operate. In this blog, we will discuss it is what the MTD initiative is and how it will impact UK professionals in finance, as well as how is the best way to get ready yourself for it.

What is the purpose behind Tax Digital?

Making Tax Digital (MTD) is one of the key elements of the UK government’s strategies to make it easier for both businesses and individuals to put tax issues in check. The goal is to ease the administrative burden for taxpayers and make it simpler to meet taxes.

Under MTD the taxpayers will have to keep a digital record of their income as well as expenditure. These records will be used to create quarterly tax returns, which are electronically filed with HMRC.

The implementation of MTD is gradually rolled out starting in April 2019, with the first mandatory Returns due in the month of October. This means that both businesses and individuals who earn revenue that is above the threshold for VAT of PS85,000 will be required to begin keeping electronic records and submitting quarterly Returns starting in April 2019.

The positive side is that there are many software applications available to aid you in meeting the requirements of MTD. If you’re using an accounting software program that manages your money, then you might discover that the software you’re using is updated to incorporate MTD-compliant functions.

What are the advantages of Making Tax Digital?

While the UK government strives to create an increasingly digital tax system, Making Tax Digital (MTD) is becoming more relevant for financial professionals. MTD is a major element of the government’s strategy to make it simpler and less expensive for companies to make sure they are paying their taxes correctly.

The primary advantage of Making Tax Digital is that it makes it simpler for companies to meet the tax requirements of their business. MTD can help businesses manage their tax affairs, and simplify the process of filing exact returns. This will save companies both time and money as well as ease the burden of compliance for HMRC.

In addition, MTD should make it easier for companies to claim allowances and other reliefs since they’ll have access to current information about their tax situation. This will help companies reduce their tax bills and increase cash flow.

In general, Making Tax Digital is designed to streamline the tax system for businesses as well as HMRC. It is yet to be determined whether it is successful in achieving this objective However, the advantages are substantial.

How does Making Tax Digital work?

Making Tax Digital (MTD) is an essential aspect of the government’s plans to help businesses and individuals to manage their tax affairs in order.

Under MTD business and sole traders who have an annual taxable turnover that exceeds the threshold for VAT registration are required to make use of compatible software to maintain records electronically and send annual reports quarterly to HMRC.

The first phase MTD which affects VAT-registered firms with a tax-free income that is above the PS85,000 threshold came into effect on April 1, 2019.

The second phase brings in MTD to tax income for businesses that are not incorporated and landlords who earn an annual income of more than PS10,000 starting in April 2020.

Compatible software should be used to satisfy MTD requirements. This includes accounting software and special bridging software that can connect different kinds of software. Free accounting software is accessible from several suppliers, such as GOV.UK’s personal Making Tax Digital service.

HMRC has released a detailed guideline regarding the way Making Tax Digital works, including what you should do in the event that you’re affected. Find more information on MTD as well as how it may impact you on GOV.UK. GOV.UK website.

How will taxpayers be affected? Making Tax Digital?

Making Tax Digital (MTD) is a new initiative by the government that will require both people and businesses to keep electronic records of their income as well as expenditure, and provide these to HMRC on an annual basis. The goal to achieve the goal of MTD will be to help make tax administration more efficient and reduce how much time and cost companies spend to comply with tax laws.

MTD will impact everyone who must submit self-assessment tax forms. It includes sole traders as well as Partnerships, Limited Companies, Trusts, and charities. Additionally, any company or person that pays VAT will also suffer the effects of Making Tax Digital.

HMRC has said they believe that Making Tax Digital is not meant to be an obligation for businesses to comply as they have developed the system in that it will be simple to comply with. But, companies will have to buy accounting software or systems that can be used to Making Tax Digital in order to file their records electronically.

There is some concern from companies about the cost related to implementing Making Tax Digital, and the effect it could affect the flow of cash. HMRC has stated that it will offer support and advice for businesses to transition towards the digital system, however, certain finance professionals are worried that this isn’t enough.

In the end, Making Tax Digital is an important change to taxation in the UK tax system. both individuals and businesses will have to be proactive to ensure that they’re in compliance.

When are deadlines set for Making Tax Digital?

The Making Tax Digital (MTD) initiative is a major element of the UK administration’s efforts to enhance the tax system to be more efficient and efficient. It requires individuals and businesses to submit tax returns as well as other documents electronically, using software approved by the government.

The initial phase of MTD started at the start of April 2019 for businesses that have an annual turnover greater than the threshold for VAT (currently at PS85,000). Businesses must utilize MTD-compatible software to store electronic records and file their VAT tax returns online.

The second phase MTD will be available from April 2020 and will require all businesses to utilize MTD-compatible software in order to submit their income tax and National Insurance returns. The Self-Assessment deadline to file the tax returns will be 31 January 2021.

If you’re a business or a person who is affected by MTD It is essential to know the timeframes for compliance. Infractions to the rules of MTD could result in sanctions for financial loss.

What can I do to prepare for Making Tax Digital?

The process of making Tax Digital (MTD) is one of the key elements of the plans by the government to assist people and businesses to handle their tax affairs in order and to stay up with their tax obligations.

The first step for those who are affected by MTD is to know what this means to the taxpayer and how it could affect the way they handle their tax returns. The next step is to act to make sure they are ready to deal with the new rules.

For companies, the most significant change of MTD is that starting in April 2019, they’ll need to make use of compatible software in order to manage their records electronically and send taxes to HMRC. The result is that many companies will need to make major adjustments to the way that they currently store and manage their financial information.

Individual taxpayers won’t suffer the effects of MTD until at most 2020, however, HMRC has announced that it will in the near future roll out the digital method to every aspect that is related to tax management. Therefore, it is sensible for taxpayers to begin thinking about how they can maintain their records electronically in the future.

There are many things that people and businesses can do to prepare for the Making Tax Digital:

Businesses:

Check to see if your software for accounting is compatible with Making Tax Digital – if not, you might need to change providers

Discuss with your bookkeeper or accountant regarding the new rules and how you’ll need to change them beginning in April 2019.

– Ensure you have an electronic device like a laptop computer, desktop computer, or smartphone.

Conclusion

The Making Tax Digital initiative is one of the key elements of the UK government’s plans for modernizing taxes and improving their efficiency. As a financial professional it is essential to be aware of the implications of this initiative and how it could impact you and your clients. We hope that this post will give you an outline of the details of Making Tax Digital and what it will mean for your future.