HMRC’s flagship Making Tax Digital (MTD) project came into effect in April and for now, it only applies to VAT for businesses with a turnover more than the £85,000 threshold. MTD is what the tax watchdog is calling a “fundamental” change to the way tax is collected. However, many people are unaware of these new rules.
According to research by The Association of Independent Professionals and the Self-Employed (IPSE), one in four did not know about MTD and some knew a ‘little’.
So what does this mean? For those who have an accountant, they do not need to worry as they should be on the case. If not, Freelance Corner has put together three easy steps to ensure you are MTD-compliant.
- Register for MTD. If you are VAT registered and have a turnover of more than £85,000 you will need to register at least a week before your return is due. There are a few businesses which may be exempt for six months so check HMRC’s website beforehand.
- Find the right MTD-compatible software for you. This is possibly the trickiest step and the products on the market currently are likely to charge you for this. Many of the apps available don’t just offer a service for being MTD-compatible, so it is worth shopping around to find out what will suit your business.
- Authorise your chosen software. The software provider should be able to help with this.
If you run into difficulties, don’t worry. As a last resort, you will still be able to declare your VAT via the old system. HMRC has said it will be lenient, but it is not an excuse not to pay.