In April 2019, HMRC introduced the Making Tax Digital (MTD) programme. Currently, all VAT-registered businesses are required to keep digital records and use approved software to submit their VAT returns to HMRC on a quarterly basis. There is a published plan to extend the Making Tax Digital (MTD) programme, the current key dates are:
- April 2026: self-employed businesses and landlords with business or property income above £50,000 per annum will need to follow the MTD rules for Income Tax. Please note that this was originally scheduled to begin in April 2023, but a delay to 2026 has been confirmed and the threshold has changed.
- April 2027: self-employed businesses and landlords with business or property income above £30,000 per annum will need to follow the MTD rules for Income Tax.
It is also the government’s intention to extend Making Tax Digital to cover Corporation Tax and a consultation programme relating to this is underway. A pilot scheme is likely to be introduced with the full scheme to follow, but as at March 2023, there is no confirmed timetable. More information can be found on the government website.
The Making Tax Digital programme has accelerated the adoption of digital and Cloud Accounting systems by many businesses. When first introduced accounting software was purchased and then installed on a computer (or server). The user was responsible for security, installing updates and backing up the data. In recent years, as with many other software products, there has been a shift to cloud-based accounting systems. This brings a number of advantages:
Many of the leading systems provide additional services such as management accounts, credit control, bank reconciliation, budgeting and payroll and are approved to provide real-time filing of VAT returns as required by the MTD regulations.
Choosing and setting up Cloud Accounting can be off-putting, but this is where we can help. We are Xero Silver partners, and have experience of many other systems including Sage and QuickBooks, so can help you find the best solution for your business and then get everything set up for you.
We are often asked “which is the best accounting software for small business?” and while there isn’t a single cloud accounting option that will be best for every small business, we generally recommend the Xero cloud accounting solution to our clients