Making Tax Digital is one of the largest and most significant changes to tax legislation for decades, with a major impact on accountants and their clients.
Summer 2020 heralded a key announcement in the development of the UK’s Making Tax Digital programme with a new ‘roadmap’ laying out a timeline for the next milestones.
The programme, which began to be rolled out in 2018, is being extended further.
Which taxes are going digital?
VAT: All VAT-registered businesses regardless of turnover will be affected – from April 2022
Income tax self-assessment:
coming in April 2023
date to be confirmed
Where are we so far?
MTD for VAT took effect in April 2019, becoming mandatory for all businesses with turnover above £85,000. In Summer 2020, HMRC said so far, more than 1.4 million taxpayers have been successfully using MTD for VAT – including over 30% of VAT-registered businesses with turnover below the VAT threshold who have joined voluntarily.
HMRC says research has indicated those businesses who are operating under MTD fully and integrate their accounting and tax software report spend less time on their tax. Micro-businesses who use software to manage their accounts have over 10% higher productivity, according to the Enterprise Research Centre.
What are the challenges?
For individuals and businesses paying tax, the way they file their taxes is becoming a much more complicated process than they have been used to. There are a range of challenges, which accountants can help them to overcome.
- All records must be kept digitally
- Digital record keeping includes land and property income
- Filing must be carried out every quarter, rather than once per year
- All other income for an individual will be incorporated into the MTD submission process, including: pension relief contributions, dividends, bank interest, pensions received
Which clients need a solution?
Accountants may have clients affected by the extension of Making Tax Digital in the following categories:
- VAT-registered business
- Self-employed people / Sole traders
- People running a partnership
- People receiving land or property income
What are the solutions?
- Specialised tax software
- Bookkeeping software
- Bridging software
- Receipt capturing tools
What does IRIS offer?
IRIS Personal Tax enables you to complete self-assessment tax returns and P11D forms with ease and file online. Designed for partners of UK accountancy practices and tax agents, it is compatible with HMRC’s Making Tax Digital Income Tax Pilot.
When bookkeeping software does not meet your complex VAT cases, our bridging software enables you to make VAT submissions to HMRC with ease and helps you comply with Making Tax Digital (MTD) mandates.
An app led service that will solve that age-old problem of clients swamping you with big bags of receipts. IRIS Snap eliminates time wasted on keying in data from paper records and reduces the increasing burden of quarterly VAT and MTD.
KashFlow is a cloud-based accounting solution that caters to businesses of all sizes. Features include invoicing, estimation, credit control, accounting, purchase management, payroll and reporting.