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How the upcoming Making Tax Digital changes affect your business

How the upcoming Making Tax Digital changes affect your business

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    Making Tax Digital (MTD) is the name of the government’s scheme to move all small business tax payments online, aimed at turning HMRC into the most advanced tax administrators in the world.

    Of course, no transition is as easy as we’d like it to be, and with the move to digital tax filings in full swing, there will invariably be a few growing pains as businesses adjust to the new systems and requirements.

    Here at Crunch, we’ve been helping our clients with online accounting and tax filing for over ten years, and we were amongst the early adopters of MTD for VAT working with HMRC to ensure our software was ready. We’ve been MTD-compatible since spring 2019, and all of our 11,000+ sole traders and limited company clients are operating safely in the knowledge that we’re already on top of things. More changes are planned, however, and if you’re not a Crunch client, you need to be sure your business and/or your accountant are ready for them.

    So, what’s changing, when is it changing, and what do you need to do? Let’s discuss.

    Making Tax Digital for VAT

    As it stands, all businesses with an average turnover above the VAT threshold are required to store their records and file their VAT returns using online software. This is something that all online accountants, such as Crunch, should already be doing for you if you fall into this category.

    From April 2022, however, all VAT-registered businesses must file their VAT returns online, regardless of whether their business turnover is above or below the VAT registration threshold. If you find yourself in this category, you can either choose to voluntarily join the Making Tax Digital service today, or wait until it becomes mandatory in 2022. We would definitely recommend the former, though – the sooner you’re signed up and getting used to the process, the better.

    If you’re a Crunch client, the good news is that we’ll already have helped you enroll for the Making Tax Digital VAT scheme, so it’s already taken care of!

    Making Tax Digital for Income Tax

    The government has delayed the implementation of Making Tax Digital for Income Tax Self-Assessment (known as ‘MTD for ITSA’) until 6 April 2024, with MTD for general partnerships postponed to 2025. The change to the tax year basis for unincorporated businesses has also been delayed until at least April 2024.

    MTD for ITSA applies to an individual, partnership or trust with total business or property income above £10,000 per year. The threshold of £10,000 applies to total gross income or turnover.

    The delays were announced to ensure businesses and landlords have sufficient time to prepare for MTD for ITSA in the aftermath of the COVID-19 pandemic.

    We’ve published an article about MTD for ITSA if you need more information.

    Making Tax Digital for Corporation Tax

    The transition to digital Corporation Tax filings is still in its consultation period at the time of writing. The government is still looking to hear from small business owners, agents, professional bodies, and software developers.

    The government has pledged that there will be no obligation to complete Corporation Tax filings online until at least 2026, and will be inviting businesses to join a pilot for the program when it becomes available. We’ll be updating this article in the future when more information is provided.

    While you’re here, don’t forget to check out our article on “How to reduce your Corporation Tax” to make sure you’re running your business as tax-efficiently as possible.

    How to prepare for changes to Making Tax Digital

    If you’re unsure how exactly to meet the requirements, the answer is relatively simple: you need to get your hands on some MTD-compatible software that allows you to digitally send and store your records.

    On, you’ll find a comprehensive list of software options that HMRC themselves have rubber-stamped as MTD-compatible. You’ll notice that Crunch feature on that list, too, so if you’d like to save yourself hours of searching and debating your options, why not give us a call?

    On our Making Tax Digital Hub, you’ll find a complete breakdown of the government’s ambitions for MTD, what you need to do to prepare, and the areas which are currently subject to MTD rules.

    As you can see, we’re experts in this area, and not only are we already helping thousands of people file their VAT returns in compliance with MTD guidelines, we’re also hard at work behind the scenes preparing for the future changes, too.

    If you’d like Crunch to help you manage your new and impending responsibilities under the Making Tax Digital scheme, give us a call or book a callback with one of our friendly, expert advisors. In the meantime, why not head over to our pricing page for a full breakdown of the packages and services we offer?

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