Expected to roll out in 2020 the earliest, Making Tax Digital (MTD) is an HMRC scheme that will require businesses to do all their taxes online. Making Tax Digital for VAT will be the first one to become mandatory, with your first full VAT quarter under MTD starting after 1 April 2019.
This digitisation will be relevant to all VAT-registered businesses who have a VAT-eligible turnover. This is currently set at £85,000. Businesses that fall into this category will have to move over to HMRC-compatible accounting software by spring 2019.
Making Tax Digital means big changes for SMEs. Companies will have to start using accounting software and are discouraged from relying on spreadsheets, where cell values can easily be changed. However, there will be a 12-month “soft landing period” when you can still copy paste data from a spreadsheet into your accounting software.
Using accounting software can be a notable added cost to small businesses. However, digitising taxation will be more effective and efficient, and you’re more likely to get your taxes right on the first try. The government expects the automation of taxes to reduce errors and generate more revenue.
You can read the entire guide to Making Tax Digital on the Sage website.