Making Tax Digital (MTD) has been a hot topic for businesses and accountants alike, especially as we navigate the intricacies of the 2024/25 tax year.
With over 180 years of experience, at Pearson May we’ve seen many changes in the tax system, but MTD represents one of the most significant shifts in recent memory.
In this blog, we’ll explore the latest government updates, what they mean for you, and how we can help you stay compliant and efficient.
Recent government updates
The UK government has made several recent announcements regarding MTD, reflecting a continued push towards digitalising the tax system. The core aim is to simplify tax filing, reduce errors, and improve the overall efficiency of tax collection. According to HMRC, MTD aims to save businesses over £3 billion annually by reducing the tax gap.
This year’s key change is extending MTD requirements to smaller businesses and individuals. From April 2024, all VAT-registered businesses, regardless of turnover, must comply with MTD for VAT. This is a significant update, as previously, only businesses with a taxable turnover above the then VAT registration threshold of £85,000 were required to use MTD-compatible software to submit their VAT returns.
Furthermore, the introduction of MTD for Income Tax Self Assessment (ITSA) is now set for April 2026. This extension will initially apply to sole traders and landlords with business or property income above £10,000 per year. The government aims to expand this to include more taxpayers in the following years.
What does this mean for you?
For many, the transition to MTD may seem daunting. Maintaining digital records and using specific software can feel like an added burden, especially for smaller businesses and those less familiar with digital tools. However, with the right support, this transition can be smooth and even beneficial in the long run.
First, it’s important to understand that MTD isn’t just about meeting a legal requirement; it’s an opportunity to streamline your financial processes. Using MTD-compatible software can help you track your income and expenses better, ensuring that your records are accurate and up to date. This makes tax time easier and provides valuable insights into your business’s financial health throughout the year.
How we can help
At Pearson May, we’ve been supporting clients through changes in the tax system for over a century. Our experience means we understand the challenges and opportunities that come with MTD. We’re here to help you choose the right software, train your staff, and ensure you’re fully compliant with the latest regulations.
Choosing the right software: With many MTD-compatible software options available, selecting the one that best suits your needs can be overwhelming. We can guide you through the selection process, ensuring you choose software that integrates smoothly with your existing systems and meets your business’s specific needs.
Training and support: Switching to digital record-keeping and filing might be a new experience for you and your team. Our experts provide comprehensive training and ongoing support to ensure you feel confident using the new systems. We also offer a range of resources, from webinars to one-on-one sessions, to keep you informed and up to date.
Staying compliant: Compliance is crucial, and we’re here to ensure that you meet all the necessary MTD requirements. This includes the technical aspects of digital filing and understanding your obligations regarding record-keeping and data security.
Benefits of MTD
While the initial transition may seem challenging, MTD offers several long term benefits. Accurate, real-time data can help you make more informed business decisions. It also reduces the risk of errors, which can lead to costly fines and penalties. Additionally, the shift to digital records means less paperwork, freeing up time for you to focus on growing your business.
HMRC’s data suggests that businesses using MTD-compatible software have a significantly lower error rate in their submissions, which can result in a more favourable tax outcome. Moreover, with the government’s increasing emphasis on digitalisation, staying ahead of these changes can give your business a competitive edge.
Looking ahead
As we move closer to the full implementation of MTD, staying informed and prepared is essential. The government’s timeline suggests a phased approach, with additional requirements likely to be introduced over the next few years. By preparing now, you can ensure that you’re not caught off guard by future changes.
At Pearson May, we’re committed to confidently helping our clients navigate these changes. Whether you’re a sole trader, a small business, or a larger enterprise, we have the expertise and experience to support you through the transition to MTD.
If you have any questions or need assistance with MTD, don’t hesitate to contact us. We’re here to help you understand the requirements, implement the necessary changes, and take advantage of digitalisation’s opportunities.
Let’s work together to make this transition as seamless as possible. Reach out to us today and find out how we can support your journey towards MTD compliance!
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