Making Tax Digital

As a modern and innovative accounting firm, Knowles Warwick accountants are here to provide Making Tax Digital help and give you a roadmap to success.

Whether you choose Sage, Quickbooks or Xero as your online accounting tool, we will help you to implement your new digital tax process and provide ongoing support as you get to grips with your software of choice.

What is Making Tax Digital?

Making Tax Digital, or MTD, is the UK government’s new tax system that means by 2027 all taxpayers – both individuals and businesses – will have an online account where they can update their details and pay their tax bills online.

This means:-

• no more paper tax returns
• all of your tax information in one place
• the ability to update your account in real time and pay tax based on your activity during the year
• no need for tax rebates as you will only pay what you owe

Making Tax Digital for VAT

If your business turns over more than £85,000 you’ll need to submit your VAT returns online, using approved accounting software.

There are significant advantages to going “digital” and we’ve been working with a number of our clients to help them streamline the way they do their accounts.

Moving to an online accounting software means:

• a clear picture of your current financial position, in real-time;
• automatic updates that mean you can spend more time doing what you enjoy;
• your accounts are 100% online, so there’s no software to install and everything is backed up automatically;
• updates are free and instantly available; and
• upfront accounting software costs are eliminated – upgrades, maintenance, system administration costs and server failures are no longer an issue.

Making Tax Digital Timeline

Since April 2019, MTD for VAT reporting has been compulsory for VAT registered businesses and organisations (including sole traders, partnerships, limited companies, non-UK businesses registered for UK VAT, trusts and charities) with turnover above £85,000.

MTD for Group VAT registrations came into effect in April 2022, when HMRC also launched its MTD for ITSA (Making Tax Digital for Income Tax Self Assessment) beta programme.

From April 2026, MTD for Income Tax will become mandatory for self-employed businesses and landlords with an income above £50,000. Then, in April 2027 MTD for ITSA will be compulsory for sole traders and landlords earning over £30,000.

Further details on MTD for Corporation Tax have yet to be announced.

Get ready for MTD

Follow our checklist to prepare your business finances for MTD:

If you don’t already use software like Xero, Quickbooks or Sage, you may be able to use a Bridging software to help you file your returns, but your HMRC Gateway will no longer be available. You’ll also need to authorise your software before you can get started filing.

Check if your current software is compatible and authorise it here.

Once your software is ready, you’ll need to sign up for MTD on the GOV UK website. To do this you’ll need your existing Government Gateway log in, and your VAT number.

Click here to register for MTD.

Take a look at the government’s guide on MTD for VAT here.

What Next?

At Knowles Warwick, we’re taking a proactive approach to the ongoing changes to the tax system and will ensure all of our clients are prepared and compliant. Get in touch to discuss how we can support you as you transition to online accounting and digital tax. Call us on 0114 274 7576 or email bestadvice@knowleswarwick.com.