Making Tax Digital Part 1

Making Tax Digital report 2021

Understanding ‘Making Tax Digital’

Making Tax Digital for Business is a Government initiative also known as MTD.  This is a legal requirement implemented and monitored by HMRC – Her Majesty’s Revenue and Customs.

Key compliance

  • Keep records digital
  • Submit the return at least every 3 months
  • Final submission 10 months after year-end or 31 January whichever is sooner
  • Pay your tax by 31 January after the year-end (can be paid early)

Date MTD compliance starts

You must follow the rules for your next accounting period that starts on or after 6 April 2023, if your taxable turnover from your self-employed business or income from the property is above £10,000.

Who will need to comply with MTD?

  • Sole traders
  • Partnership & each partner
  • Limited companies
  • Limited Liability Partnerships
  • Landlords
  • Individuals with over £10,000 as a second income.

What will you need?

  • Create Government Gateway Account with HMRC
  • HMRC authorised Book-keeping software to submit your records digitally.
  • Tools to convert your sales invoice into digital e.g. pdf
  • Tools to convert your suppliers’ invoice into digital e.g. pdf
  • Advice from expert e.g. Accountant

Who is exempt?

  • Sole traders with income below £10,000
  • Partnership & each partner with income below £10,000
  • Landlords with rental income below £10,000
  • Charities
  • Community Amateur Sports Club

The definition of “Digitally Exempt” is as below:

“A person who is a practicing member of a religious society or order whose beliefs are incompatible with the use of electronic communication; and person for whom making Tax Digital is not reasonably practicable for reasons of disability, age, remoteness of the location, or any other reason.”

Penalties for non-compliance:

  • Point-based system
  • Each missed deadline is awarded points.
  • When points reached a certain threshold, penalties are issued.

For more detailed information, please download the full report from this link.

‘Making Tax Digital’ Report

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Sterling Finance UK Limited

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