What does Making Tax Digital mean for the self employed?
What is Making Tax Digital?
Making Tax Digital (MTD) is part of HMRC’s plan to make tax returns more efficient and effective, by becoming more digitally advanced. Sounds great, right? Well, change can definitely be a good thing but if you don’t submit your digital tax correctly you could be facing some big penalties from HMRC!
Why is it happening?
The government is making these changes as the latest tax gap figures show that tax return mistakes are costing in excess of £9 billion each year. That’s more than just a bit of spare change! In an effort to reduce accuracy errors HMRC’s Making Tax Digital will force all businesses, even the self-employed, to keep digital records which will be submitted directly to HMRC right from their accounting software. These new digital practices have already been enforced for many larger VAT-registered businesses that are reaching a turnover above the VAT threshold. If your business has made over the £85,000 tax threshold then you should already be submitting digital VAT returns. Don’t panic though – Mazuma can help with all things MTD if you need support.
What do you need to be aware of?
Ok, so the first thing to get to grips with is the tech. You may need to get new accountancy software or update your current program. The software you use needs to be compatible with HMRC’s Making Tax Digital systems so that you are able to submit your account info directly from your computer to theirs.
The other major change for self-employed businesses is when you actually send this info to HMRC. Under the new system, data will need to be submitted each quarter and it is likely that you will also be required to make four payments per year to spread out your tax bill.
At Mazuma all the accountancy software we use is compatible with the new HMRC system and we’re always on top of the submission deadlines so if this sounds like too many new things to fret over you can avoid all the stress by working with us!
When do you need to be ready?
Due to a little event called Brexit (you might be familiar with the term…), the timeline for MTD has changed slightly. Making Tax Digital initially came into effect for some businesses in April 2019. However, the latest information from the government suggests that the HMRC have delayed mandating MTD. You can read more about the delay to MTD on our blog.
Does all this change sound like too much of a hassle? If you’re already a Mazuma client we’ve got your back – meaning you have to do nothing! If you aren’t confident about using new accounting software or are worried the change will take too much of your valuable time and aren’t working with us yet… Don’t panic – there’s still time to get help from us at Mazuma! Get in touch with us to find out more or get a free quote to see how we can help you conquer the MTD minefield!