HMRC are making significant changes to the UK tax system in order to fulfil their ambition of becoming the most digitally advanced tax administrators in the world. In order to meet this goal they have to ensure that our tax system is not confusing for people and is efficient as possible.
HMRC have been carrying out research including live testing with businesses who volunteered to participate in order to develop the process of Making Tax Digital (MTD).
What does this mean for VAT Registered businesses?
MTD was made essential for businesses back in April of 2019 who exceed the VAT threshold. VAT registered businesses should already be following the new processes and businesses who do not meet the criteria are invited to take part if they wish voluntarily.
What does it mean for MTD for Self Assessment customers?
If your income exceeds more than £10k per year, from 6th April 2023 you will need to meet the rules of MTD for your next accounting period following this date.
Why has MTD been introduced?
HMRC decided to introduce MTD due to the amount of errors in which were taking place. HMRC reported that between 2018/2019 tax errors cost the Exchequer £8.5 billion!
MTD will cut costs and encourage businesses to upgrade their software and become more efficient using the latest technology. MTD will encourage businesses who are still using old school methods for their accounts such as spreadsheets to invest in integrated software eliminating the room for human errors. Modern technology will save businesses time and money in the long run.
Will I have to invest in new technology and Software?
Businesses will need to ensure that they are using compatible software for MTD that much is true. But it doesn’t have to cost the earth. There are also more advantages that outweigh the cost of investment into new technology, such as making your business more efficient and saving time and money. Use the HMRC search tool to find out what software is compatible https://www.tax.service.gov.uk/making-tax-digital-software