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What Are the Changes to Making Tax Digital?

Since April 2019, UK businesses with a VAT turnover of more than £85,000 have been required to complete their annual tax returns digitally. Making Tax Digital (MTD) will apply to businesses that charge VAT and have a taxable turnover of less than £85,000 starting from 1st April 2022. Affected companies will receive letters informing them of the change if they haven’t already. Approximately 1.1 million small businesses in the UK will be impacted by the introduction of MTD when the changes are implemented. 

At Hayvenhursts Accountancy Services we adapt our services to suit your business needs, whether it’s advice you need to be compliant with MTD or if you need other business accounting services one of our experts can help. We work with small, medium and large businesses throughout the UK and have an experienced and qualified team to support you. 

What this means for small business owners

Small businesses currently reporting VAT through HMRC online or by post will be required to keep digital records and file VAT returns using certified software for their accounts as of 1st April 2023. If they don’t do this they risk incurring unexpected fines so it is really important to understand the changes and know what you should be doing so you are prepared.

Impacted businesses must begin making Tax Digital preparations ahead of the April 2022 deadline and by doing it before the deadline you won’t have to go back through your whole year’s accounts and submit them through one of the certified software. It’s never too early to put the right procedures and infrastructure in place, even for non-VAT registered firms and landlords, who have until April 2024 to comply with MTD for Income Tax (ITSA).

What Are the Changes to Making Tax Digital 2023?

Creating a Making Tax Digital Account

An important part of Making Tax Digital is having an online account with HMRC. This is to ensure your tax information can be securely stored and accessed by you and HMRC. You’ll need to sign up if you don’t already have an account. This can be done through the website. Once you have an account, you can log in and view your tax information online. Your online account with HMRC is the key to complying with MTD. By having an account, you will be able to access your tax information easily and securely. If you do not have an account, you must sign up for one through the website.

How to get ready for Making Tax Digital

The checklist below can assist small businesses in achieving MTD compliance:

Understand your deadlines and the implications of MTD for you

Businesses must carry out research and assist their teams up to speed with the changes and new requirements. There is a lot of useful information around, but knowing where to start can be challenging. That is why HMRC has an MTD VAT section (page) on their website, which gives important information for businesses to determine whether they are eligible, how to sign up, and more.

Consult your bookkeeper or accountant

Given the many obstacles that small businesses can face, it’s easy to push a new digital tax plan to the side. Although April 2022 may seem far away, now is the ideal moment to enlist the assistance of your accountant or bookkeeper to ensure you are set up and ready for the changes. They can advise you on how to digitise or modernise your accounting system, set one up and when to do so.

Small businesses have started to recognise the critical role of their bookkeepers or accountants in ensuring their ongoing success and compliance. In fact, according to Xero’s research, nearly half of small businesses (45%) say their bookkeepers or accountants are more vital than ever. And it’s not hard to see why accountants can help small business owners deal with complex difficulties they don’t have time to learn about independently. If you need an accountant for your business contact us today on 02920 777 756 and we can help you understand and support you in regards to the MTD changes.

Be ready for the change

It’s not easy to make a change. In fact, according to a recent study, the major challenges limiting small businesses from implementing MTD software are:

Aversion to change

Uncertainty about outcomes

The perceived difficulty of digitalisation

The capacity to compare solutions quickly

Digital transformation, on the other hand, can help reduce workloads and increase agility. Whether your small company hasn’t yet executed its digitalisation plan, it’s still early, or you are wary of more change, Making Tax Digital can jumpstart your digital transformation.

Investigate your software options

HMRC will request various digital records, including the business name, the rate of VAT charged on goods and services supplied, and other information. While spreadsheets can be used to quantify or sum up VAT transaction records and determine what information to dispatch to HMRC, they must be sent using compatible software.

HMRC will only recognise VAT returns sent by authorised MTD apps, such as Xero and Free Agent unless you already have a legal exemption. It’s a good idea to start looking for a supplier as soon as possible and a good accountant will help you with this and likely recommend one which is compatible with their systems and processes.

How to find the right MTD App

Although each organisation has unique requirements, businesses should ensure that the software they select meets the following criteria and Hayvenhursts can advise you on the best option for you:

It pulls transaction data directly from the bank, invoice processing software, or POS system

Calculates your profitability and tax requirements profits automatically

Transactions are updated daily, allowing businesses to stay one step ahead of bank reconciliations

Stores photographs of paper receipts and invoices against transactions with a mobile device to create digital records of them

Submitting VAT returns under MTD

VAT returns must be submitted using functionally compatible software and won’t be compromised when using your HMRC Business Tax Account.

Exemption from MTD

Exemptions are allowed if businesses can demonstrate that using PCs, software applications, or the web to satisfy MTD standards is neither reasonable nor viable. It could be related to one or more of the following factors, though this is not an exhaustive list:

Computer literacy



Limited Internet access

Note: VAT registrations are not exempt solely because of the additional effort, time, or cost involved. Exemption requests must be filed with HMRC and clearly explained why the exemption is being requested. Businesses already exempt from filing online VAT returns will not be required to comply with MTD.

Penalties for non-compliance

HMRC has the authority to impose fines on VAT registrations that fail to comply with the digital records or digital link requirements of MTD. In addition, penalties will be charged on MTD registrations that don’t meet the deadlines.

Your accountant is the key to complying with MTD or Making Tax Digital UK

Your accountant is the key to complying with MTD. Without their expertise, it would be difficult for you to comply with all of the new regulations. Fortunately, most accountants will be familiar with MTD and can help you ensure that your business is compliant in the easiest and most accessible way.

While some businesses may be tempted to try and go it alone regarding MTD, this is usually not a good idea. There are a lot of intricate rules and regulations that need to be followed for your business to be compliant. Making a mistake could cost you a lot of money in fines or penalties so always get advice.

Your accountant will be able to help you navigate the complexities of MTD and ensure that your business is compliant. They can also help you take advantage of any tax breaks or incentives that might be available to companies that are compliant with MTD. Contact us today on 02920 777 756 and we can help prepare your company for Making Tax Digital.

If you’re not already using accounting software for your business, now is the time to make the switch. If you are using accounting software but aren’t currently VAT-registered, you should start considering whether you need to register for VAT to comply with Making Tax Digital for VAT (MTDfV). As your accountant we can advise you on the best course of action for your business, making the transition easy and without any headaches.

Whether you are a ‘start-up’ business looking for your first accountant or an established business seeking more from your accountant, we can offer you the best accountancy services in the UK. In order to provide the best service to our clients, we strive to get to know you and understand your business, needs, and goals. We offer the personal service of a local accountant, with the infrastructure and experience of a large national firm.

Finding an accountant who matches your needs, feels comfortable with you, you can trust, and whose fees are fair is an important decision. We’re here to help and advise you whenever you need us, without charging you every time you call. 

Contact us today on 02920 777 756 and we will arrange for one of our expert team to give you a call to support you in starting your Making Tax Digital journey.

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