The Government has announced that Making Tax Digital (MTD) will be extended in April 2022 and again in April 2023.
MTD currently affects businesses above the VAT threshold of £85,000, who are required to keep digital records and submit their VAT Returns through Government approved software.
What changes in April 2022?
In April 2022 this VAT MTD will be extended to all VAT registered businesses with turnover below the VAT threshold. This will require many of these smaller businesses to adopt a software solution for their records for the first time.
It’s important when moving across to software to do so in good time, and after giving careful thought to the best solution for you and for your business. The last thing you want to do is to leave a decision to the last minute, and end up with half of your year’s records on manual records and half digitally!
If your business falls into this category, we’d recommend that you start to give this some thought now rather than later.
What changes in April 2023?
This is the big one!
From April 2023, MTD applies to taxpayers who file a Tax Return showing business or property income with a turnover above £10,000.
Again, records will need to be kept digitally, and submitted through approved software.
HMRC have said that there may be free software available for use, and that if you submit your updates quarterly, you will receive tax calculations based on those submissions, so you can plan for your tax liability. Your tax payment dates and Return filing deadlines will remain unchanged.
This announcement has evidently been made now to provide plenty of notice for businesses, landlords and agents time to plan. It also gives software providers enough notice to bring a range of new products to market, including free software for businesses with the simplest tax affairs.
As ever, as more detail emerges on the extension, we’ll pass that on to clients and we will of course be reminding you as the deadlines for change loom closer!