Prepare for Making Tax Digital Now
Making Tax Digital (MTD) is set to commence from April 2024, meaning businesses and individuals will need to start preparing for the change now.
While it might seem like a long way off, it’s actually less than 18 months away, and you don’t want to wait until the last minute to make sure you’re ready for MTD. Here, we discuss what MTD is, why it matters, and how you can begin getting your business ready for the change.
What is Making Tax Digital?
Making Tax Digital (MTD) is an HM Revenue & Customs (HMRC) initiative designed to modernise the way people submit their taxes in the UK. It requires businesses and individuals to switch from submitting paper returns or spreadsheets to using software which links securely with HMRC systems.
The software must be able to keep digital records that are structured in a way that allows them to be easily exported into an approved digital format so that they can be sent directly to HMRC when required. This will enable customers to complete their tax returns more quickly and accurately, as well as allowing HMRC to access more accurate data about taxpayers.
Why Does MTD Matter?
The introduction of MTD for Income Tax Self-Assessment (ITSA) means that those who have yet to prepare for the change have less than 18 months before they must choose and begin using approved software.
MTD eliminates the need for manual filing of ITSA returns, saving time and providing greater accuracy when dealing with complex financial data.
It also offers a higher level of transparency between HMRC and taxpayers, allowing taxpayers to view their accounts in real-time through secure online portals. As well as offering improved accuracy and visibility, MTD makes it easier for businesses and individuals to track their income and expenditure, allowing them to plan ahead more effectively.
How Can I Prepare My Business?
In order to be ready for the transition to Making Tax Digital, business owners and individuals should take steps now such as familiarising yourself with HMRC requirements and researching approved accounting/bookkeeping software solutions that can help you comply.
Some software providers may offer free trials so that you can try out the software before committing fully. It is also important during this time period to ensure that you are keeping detailed records of all transactions related to your business or self-employment activities so that you have everything ready when needed.
Furthermore, if possible, try speaking with advisors or specialists who have experience with MTD compliance so they can help guide you through the process and answer any questions you may have.
Prepare now
As we move ever closer towards April 2024 when Making Tax Digital is set come into effect for ITSA purposes, it is essential that you start preparing now for this significant change in legislation.
By taking a proactive approach now, you can reap the rewards of being prepared when MTD for ITSA goes live.