By Katie Business News • Making Tax Digital 0 Comments

MTD for Income Tax – FAQs

At A&C Chartered Accountants, we know tax can feel overwhelming—especially with new rules like Making Tax Digital for Income Tax (MTD for IT) coming into play from 6 April 2026. But don’t worry, we’re here to guide you through it, step by step.

Here are some of the most frequently asked questions to help you stay ahead:

Who will be affected, and when?

MTD for IT will apply to self-employed individuals and landlords with combined business and property income over certain thresholds. The rollout will be phased:

From 6 April 2026 – if your qualifying income is over £50,000 (based on 2024/25 tax year)
From 6 April 2027 – if it’s over £30,000 (based on 2025/26 tax year)
From 6 April 2028 – if it’s over £20,000 (based on 2026/27 tax year)

If you cross the threshold, HMRC will notify you when you’re required to comply.

What counts as ‘qualifying income’?

Qualifying income is your gross income (before expenses) from self-employment and property combined.

It’s important to know that HMRC uses the income figures from your tax return. If you’re using the Cash Basis and include VAT in your income, that VAT will count towards your qualifying income. So it’s usually best to submit VAT-exclusive figures to avoid accidentally tipping over the threshold.

Are small businesses with few transactions exempt?

Unfortunately, no exemptions apply based on the number of transactions. If your qualifying income is over the threshold, you’ll need to comply—even if you only have a few invoices a year.

What will I need to do?

Once you’re mandated under MTD for IT, you’ll need to:

  • Keep digital records in MTD-compatible software

  • Submit quarterly updates to HMRC with summaries of your income and expenses

  • Submit an annual finalisation (end-of-year return), including any other income like employment, savings or dividends

Both the quarterly updates and final return will need to be submitted via MTD-compatible software.

Do I have to make quarterly tax payments?

No. You’ll still pay tax the usual way:

  • 31 January following the tax year end (plus any payments on account due 31 January and 31 July).

I’ve heard there’s an easement for businesses under £90,000 turnover—what’s that about?

Yes, but it’s a bit limited. This easement lets businesses with turnover below the VAT threshold (£90,000) submit just total income and total expenses each quarter instead of a detailed breakdown by category.

You’ll still need to record every individual transaction in your software—it’s just the reporting categories that are simplified.

What if I own a property jointly with someone else?

Good news. If your property income is under £90,000, there’s an easement that lets you report a single income figure each quarter and a single total expense figure in the fourth quarter for jointly held property.

However, you’ll still need to separately record and report any residential property finance costs (such as mortgage interest).

I already file VAT returns quarterly—will these deadlines align?

Not always. MTD for IT quarters end on 5 July, 5 October, 5 January and 5 April. But you can opt to use calendar quarters (30 June, 30 September, 31 December, 31 March) if that’s easier.

If your VAT quarters don’t match, it might be worth adjusting your VAT stagger so both VAT and MTD for IT updates align, making life simpler.

What happens if I don’t comply?

HMRC are introducing a new penalty regime for late filing and late payment once MTD for IT kicks in.

Possible penalties include:

  • Fines for missing quarterly updates or final returns

  • Up to £3,000 per quarter if you don’t keep digital records (HMRC haven’t yet confirmed exactly how this will be enforced)

Penalties for errors will apply to the end-of-year return. While there’s no penalty for errors in the quarterly updates, it’s still vital to keep records accurate and up to date.

How A&C Chartered Accountants can help

We’re not just here to keep you compliant—we’re here to make tax simpler and less stressful for you. Whether you’re a sole trader, landlord, or both, we’ll help you:

  • Choose the right MTD-compatible software

  • Set up your digital record-keeping

  • Stay on top of deadlines and reporting

Don’t wait until 2026 to get ready—let’s plan ahead together.

Call A&C Chartered Accountants today for a friendly chat or to book your MTD readiness review.

By Katie Business News • Making Tax Digital • Tax 0 Comments

Preparing for Making Tax Digital for Income Tax: What It Means for You

With just over a year to go before Making Tax Digital for Income Tax (MTD for IT) becomes mandatory, now is the time to check whether your business will need to comply from 6 April 2026.

Who Needs to Comply?

If you are a sole trader or run an unincorporated property business, you’ll need to comply with MTD for IT if your qualifying income (generally turnover from your sole trade or property business) is £50,000 or more in the 2024/25 tax year.

While it’s too early to confirm your 2024/25 income, your 2023/24 self-assessment tax return can give you an indication. If your income was above or nearing £50,000, and you expect it to remain at that level or increase, you’ll likely be mandated into MTD from April 2026.

What is HMRC Doing?

HMRC will use 2023/24 tax returns (submitted by 31 January 2025) to identify affected taxpayers. In the coming months, they’ll be sending letters to those who are likely to be required to comply, explaining why they fall within the new rules.

What Does MTD for IT Involve?

If you are required to comply, you’ll need to:

  • Keep digital accounting records using compatible software
  • Submit quarterly digital reports to HMRC

For some, this will be a significant change, but it could also bring benefits, such as improved financial tracking and tax planning. We can do both of these requirements on your behalf as part of our annual accounting and bookkeeping services.

How We Can Help

If you receive a letter from HMRC or want to prepare early, we’re here to help. We can guide you in choosing the right software and setting up processes that make MTD compliance as smooth and beneficial as possible.

If you have any questions or want to get ahead of the changes, speak to our team today.

Need more information?

At A&C Chartered Accountants, we’re not just accountants; we’re your partners in success. Based in Manchester, our experienced team handles everything from managing limited company and sole trader accounts to expertly navigating tax returns. Beyond financials, we play a crucial role in driving your business’s growth, strategically steering it towards success with confidence and clarity.

CONTACT US TODAY

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By Katie Making Tax Digital 0 Comments

MTD for income tax reporting

MTD for income tax reporting:

HMRC are currently consulting on the precise details of what needs to be reported each quarter. As expected, it seems the accounting software will need to record and report income and expenditure in the same categories currently used for self-assessment.

The main categories are:

  • Turnover/gross rents
  • Costs of goods sold
  • Materials
  • Wages and salaries of employees
  • Sub-contractor costs
  • Rent, rates, power and insurance
  • Repairs and renewals
  • Professional fees
  • Telephone and other office costs
  • Interest on bank and other loans
  • Motor and travel expenses

HMRC also propose that those businesses with turnover below the £85,000 VAT threshold will only need to report the totals of income and expenditure each quarter which will be a welcome simplification for small businesses.

Need more information?

Do you need further guidance on MTD for income tax reporting? We offer a wide range of services which are unique to your business. Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

Our fantastic team at A&C Chartered Accountants are here to help.

By Katie Making Tax Digital 0 Comments

Making Tax Digital update

Making Tax Digital update:

Making Tax Digital (MTD) for VAT has been with us since April 2019, with the extension to all VAT registered businesses from April 2022.

The next roll-out will be the introduction of MTD for income tax which is scheduled to start in April 2024.

The obligation to keep records in a digital format and report information quarterly will apply to unincorporated businesses and property landlords with gross income from all business activities in excess of £10,000 a year.

Businesses operating MTD for VAT may already have ‘functional compatible software’ for income tax purposes but will need to get into a new routine for income tax reporting.

The changes will be more significant for property landlord businesses, most of whom are not VAT registered and so have not already been through MTD for VAT.

If you believe you need a new digital accounting system for your business, there are a number of MTD compliant accounting software packages on offer and we can advise you on the one that is most appropriate for your business. There are even relatively low-cost software packages specifically designed for property rental businesses.

Need more information?

We offer a wide range of services which are unique to your business and have already moved across all our clients to Making Tax Digital. Do you need further support with the new Making Tax Digital update? Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

Our fantastic team at A&C Chartered Accountants are here to help.

By Katie Making Tax Digital 0 Comments

MTD for income tax – Quarterly information to be reported by businesses

Making Tax Digital (MTD) for Income Tax will apply to sole traders, property landlords and certain other businesses with gross turnover and/or property income over £10,000 a year and will commence in April 2024. The system will then be extended to partners from April 2025 and LLPs and partnerships with corporate members from April 2026.

The Income Tax (Digital Requirements) Regulations 2021, set out the requirements that relevant persons must comply with under MTD for Income Tax. These include the use of MTD-compatible software to keep and preserve their business records (income and expenses) digitally, send quarterly updates of their records to HMRC and submit an end-of-period statement to HMRC.

HMRC has now published draft notices of the detailed provisions for consultation. The consultation invites views on these which provide additional information on the key requirements of MTD as they relate to:

  • The use of functional compatible software.
  • The information required when submitting quarterly updates and end-of-period statements.
  • Retail sales election.

The draft notices specify the proposed dataset requirement. Later in the year, HMRC will publish guidance to explain how customers can reflect any accounting and tax adjustments that may be required to reconcile the quarterly submissions to the final taxable profits for the year (The End of Period Statement). The consultation sets out the adjustments that are likely to be required, such as accruals, prepayments, private use adjustments, stock and capital allowances.

As expected, the breakdown of income and expenses broadly follows the headings on the self-employment and property income pages on the Self-Assessment Tax Return.

The consultation document states that where the annual turnover is below the VAT registration threshold, the individual may choose to provide the total of all income and the total of all expenses, instead of a detailed breakdown of expenses. This is also consistent with the self-employment pages in the Self-Assessment Tax Return.

Retail sales businesses may enter a single digital record of the daily gross takings for any retail sales made.

Please talk to us about making sure your business complies with MTD. We are here to help!

For details, see: Tertiary legislation for Making Tax Digital for Income Tax – GOV.UK (www.gov.uk)

Need more information?

Do you need support with MTD for income tax? Get ahead now!

Our team of chartered accountants offer a wide range of support – from a fully done-for-you bookkeeping service to expert tax advice.

If you want to learn more about how the team can help, please don’t hesitate to contact us.

By Katie Making Tax Digital 0 Comments

MTD for VAT – new guidance on penalties for non-compliance

MTD for VAT – new guidance on penalties for non-compliance

HMRC have also issued new guidance on the penalties that they impose for non- compliance with the Making Tax Digital (MTD) for VAT rules. In particular, there is a penalty of up to £400 for every VAT return a business files without using ‘functional compatible software’.

Functional compatible software means a software program, or set of software programs, products or applications that can:

  • record and store digital records
  • provide HMRC with information and VAT returns from the data held in those digital records
  • receive information from HMRC

There are additional penalties if the business does not keep their records digitally.

HMRC may charge the business a penalty of between £5 to £15 for every day on which the digital record keeping requirement is not met.

To meet the digital record keeping requirement, the business’ functional compatible software must contain:

  • the business name, address and VAT registration number
  • any adjustments from calculations made outside the functional compatible software for any VAT accounting schemes used
  • the VAT on goods and services supplied, meaning everything the business sold, leased, rented or hired (supplies made)
  • the VAT on goods and services received, meaning everything the business bought, leased, rented or hired (supplies received)
  • any adjustments made to a return
  • the ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything bought and sold
  • the rate of VAT charged on goods and services
  • details of any ‘reverse charge transactions’, where the business needs to record the VAT on the sale price and the purchase price of the goods and services bought
  • copies of documents that cover multiple transactions made on behalf of the business like those made by volunteers for charity fundraising, a third-party business or employees for expenses in petty cash

All transactions must be contained in the functional compatible software there is not a requirement to scan or upload supporting documents like invoices and receipts.

Need more information?

We have helped many businesses move over to MTD. We offer a wide range of services which are unique to your business. Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

Our fantastic team at A&C Chartered Accountants are here to help.

By Katie Making Tax Digital 0 Comments

Making Tax Digital for VAT – New penalties for non-compliance

Making Tax Digital for VAT – New penalties for non-compliance

HMRC have issued guidance for VAT-registered business and their agents on how to avoid penalties for non-compliance with the Making Tax Digital for VAT (MTD) rules.

In particular, there is a new £400 per return penalty if you file a return but do not use functional compatible software.

There are additional penalties if the business does not keep its records digitally. HMRC may charge you a penalty of between £5 to £15 for every day on which the business does not meet that requirement.

Key extracts from HMRC guidance include:

You must file your VAT return using functional compatible software

Functional compatible software means a software program, or set of software programs, products or applications (apps) that can:

  • record and store digital records.
  • provide HMRC with information and VAT returns from the data held in those digital records.
  • receive information from HMRC.

You must keep records digitally

You must keep some records digitally within your functional compatible software. This is known as your ‘electronic account’. Your electronic account must contain:

  • your business name, address and VAT registration number.
  • any adjustments from calculations you make outside your functional compatible software for any VAT accounting schemes you use.
  • the VAT on goods and services you supplied, meaning everything you sold, leased, rented or hired (supplies made).
  • the VAT on goods and services you received, meaning everything you bought, leased, rented or hired (supplies received).
  • any adjustments you make to a return.
  • the ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything you bought and sold.
  • the rate of VAT you charged on goods and services.
  • your reverse charge transactions, where you record the VAT on the sale price and the purchase price of the goods and services you buy.
  • copies of documents that cover multiple transactions made on behalf of your business, like those made by volunteers for charity fundraising, a third-party business or employees for expenses in petty cash.

All transactions must be contained in your electronic account, but you do not need to scan paper records like invoices and receipts.

Please contact us if you need assistance in complying with MTD.

See: Compliance checks: How to avoid penalties for Making Tax Digital for VAT – CC/FS69 – GOV.UK (www.gov.uk)

Need more information?

We offer a wide range of services which are unique to your businesses who are just getting going! Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

Our fantastic team at A&C Chartered Accountants are here to help.

By Katie Making Tax Digital 0 Comments

Making Tax Digital For VAT HMRC Webinar

Making Tax Digital For VAT HMRC Webinar:

As you are aware, from April 2022, all VAT-registered businesses, including those with a taxable turnover below the VAT threshold will have to keep VAT records digitally and send returns using Making Tax Digital (MTD) compatible software. HMRC have webinars available on Making Tax Digital for VAT and the first one is this Wednesday coming. You can ask questions using the on-screen text box.

Register here.

There’s also a handy video on HMRC’s YouTube channel: How do I sign up for Making Tax Digital for VAT?

Need more information?

Will you be heading to the HMRC webinar for support? We are here to help. We offer a wide range of services which are unique to your businesses who are just getting going! Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

Our fantastic team at A&C Chartered Accountants are here to help.

By Katie Business News • Making Tax Digital 0 Comments

Making tax digital for income tax postponed to 2024/25

Making tax digital for income tax postponed to 2024/25:

Having listened to stakeholder feedback from businesses and the accounting profession, the government have announced that they will introduce Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) a year later than planned, in the tax year beginning in April 2024.

This will give the self-employed and buy-to-let landlords an extra year to prepare for the digitalisation of Income Tax and also allow HMRC more time for customer testing of the pilot system.

The start date for partnerships to join MTD for ITSA has been put back still further to the tax year beginning in April 2025.

There has been no change to the £10,000 per annum gross income threshold, which means that most self-employed traders and buy-to-let landlords will be mandated to comply with MTD for income tax from April 2024.

Need more information?

Making tax digital for income tax; do you need support with this? We offer a wide range of services which are unique to your business and have a wealth of experience with making tax digital! Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

Our fantastic team at A&C Chartered Accountants are here to help.

By Katie Business News • Making Tax Digital 0 Comments

Making tax Digital for income tax coming soon

Making tax Digital coming soon for income tax:

VAT registered business making taxable supplies above the £85,000 registration threshold have been grappling with Making Tax Digital (MTD) since April 2019. The next roll-out will be the introduction of MTD for income tax which is scheduled to start in April 2023.

The obligation to keep records in a digital format and report information quarterly will apply to unincorporated businesses and property landlords with gross income in excess of £10,000 a year. Businesses operating MTD for VAT will already have MTD compliant accounting software but the extension of MTD to income tax will mean a major change for property rental businesses who are outside of the current rules.

There are a number of MTD compliant accounting software packages that you might wish to consider and we can of course advise you on the one that is most appropriate for your business. There are even relatively cheap software packages specifically designed for property rental businesses.

INFORMATION IN QUARTERLY MTD FOR INCOME TAX REPORTS

The precise details of what needs to be reported each quarter have yet to be finalised, but the categories of income and expenditure are likely to be the same as currently reported for self-assessment.

The accounting software will need to record income and expenditure into the following main categories:

  • Turnover/gross rents
  • Costs of goods sold
  • Materials
  • Wages and salaries of employees
  • Sub-contractor costs
  • Rent, rates, power, insurance
  • Repairs and renewals
  • Professional fees
  • Telephone and other office costs
  • Interest on bank and other loans
  • Motor and travel expenses

It is unclear at this stage how loans to finance residential lettings will be reported as those costs are no longer deducted in arriving at rental profits as relief is now given by way of a basic rate tax deduction.

TIMING OF MTD FOR INCOME TAX REPORTS

It is currently proposed that there will be 4 quarterly reports to HMRC followed by a finalisation return when end of year adjustments will be made. For a buy to let business that would mean quarterly returns made up to 5 July, 5 October, 5 January and 5 April. There would then be a MTD finalisation submission the following 31 January.

ABOLITION OF BASIS PERIODS AND NEW TAX YEAR END?We are awaiting further information on MTD from HMRC this summer but one significant announcement on 20 July was draft legislation to abolish basis periods for unincorporated businesses for the 2023/24 tax year to simplify MTD reporting.

That change would apply to sole traders, partnerships, as well as trusts with trading and property rental income. There would also be complicated transitional rules for 2022/23 which could result in a big tax bill that year for some traders.

The Treasury are also consulting on changing the tax year itself from the archaic 5 April year end to 31 March or even 31 December. A calendar tax year would bring the UK into line with most other countries at last!

We will keep you updated when more information comes available.

Need more information?

We offer a wide range of services which are unique to your business and will guide you through making tax digital. Our team of chartered accountants have a wealth of experience in a broad range of sectors and our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

Our fantastic team at A&C Chartered Accountants are here to help.

By Katie Making Tax Digital 0 Comments

Making tax digital now extended to more businesses

Currently only VAT registered businesses making taxable supplies in excess of the £85,000 VAT registration threshold are mandated to comply with Making Tax Digital (MTD) rules. Those rules require the business to keep digital business records and send VAT returns using MTD-compatible software.

MTD for VAT is now being rolled out to all VAT registered businesses from April 2022 which may cause some traders who are VAT registered but below the threshold to consider deregistering to avoid having to comply with MTD for VAT. If you decide to do so you will need to complete Form VAT7 and account for output VAT on the market value of stock and assets still owned at the date of deregistration. This is where input VAT has been reclaimed on those assets.

There is however a £1,000 de-minimis which means that output VAT does not need to be accounted for where the combined market value of the assets is less than £6,000.

Unfortunately, deregistering for VAT will not necessarily sidestep MTD as the requirement to keep business records digitally will be introduced for income tax from April 2023. From then MTD for income tax will apply to businesses with gross income in excess of £10,000 a year which will include property landlords as well as traders and professionals.

Need more information?

Do you need more support  with the Making Tax Digital (MTD) rules.

We offer a wide range of services which are unique to your business. Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

Our fantastic team at A&C Chartered Accountants are here to help.

By Katie Making Tax Digital 0 Comments

MTD for VAT to be extended to all VAT registered businesses in 2022

Since 2019, the vast majority of VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) have been mandated to keep digital VAT records and send returns using Making Tax Digital (MTD)-compatible software.

From April 2022 these requirements will apply to all VAT-registered businesses.

It has also been announced that MTD for Income Tax Self-Assessment (ITSA), which was originally intended to start in 2018, will finally be introduced from April 2023 for unincorporated businesses and landlords with total business or property income above £10,000 per year.

Most businesses will have 2 years to prepare and test the service voluntarily prior to its introduction.

Need more information?

We offer a wide range of services for VAT-registered businesses. Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want VAT advice from a trusted accountant don’t hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively, you can email us using the form below and we will contact you as soon as possible.

Our fantastic team at A&C Chartered Accountants are here to help.

business spreadsheets explaining VAT
By Katie Making Tax Digital • Startups 0 Comments

The UK VAT rate explained

Firstly, what is VAT?

VAT, or Value Added Tax, is levied on the sale of goods and services in the UK. It is a type of ‘consumption tax’ because it is charged on items that people buy. It is also known as an ‘indirect tax’ because it is collected by businesses on behalf of the Government. However, it is important to remember that it is not charged on products of services. Duty-free goods are exempt, and this explains why it can be known as a destination-based tax, meaning the tax rate is normally based on the location of the consumer and the sales price. In the UK, the tax plays a huge role in generating the third largest revenue for the government behind Income Tax and National Insurance.

Does your business need to register for VAT?

Business owners need to be fully aware of the value-added tax (VAT) and all other things related to it no matter what. The value-added registration threshold in the UK starts from £85,000. Therefore, when your turnover is more than this amount you need to make sure you are VAT registered. You can also register your business on a voluntary basis. It is important to remember as a business owner, that this figure is more than likely to change every so often. Businesses need to consider the great benefits that come with registering even if your VAT return is way below the threshold.

Responsibilities for VAT-registered businesses

  • You must charge VAT on your goods or services.
  • Likewise you may reclaim any VAT they’ve paid on business-related goods or services.
  • You must report to HM Revenue and Customs (HMRC) the amount you have charged and paid.

It is important to note that if you have charged more than you have paid; you must pay the difference to HMRC. Alternatively, if you have paid more than you have charged, you are eligible to reclaim the difference back from HMRC.

The UK VAT rates for 2019  

  • The Standard Rate is 20% and it applies to most goods and services that are taxable in the UK
  • The Reduced  Rate is 5% and this applies to some goods and services such as children’s car seats and home energy.
  • The Zero Rate currently stands at 0%. Zero-rated goods and services include children’s clothes and most food items. Despite their being no charges on zero  rates, the sale of goods and services under this category should always be recorded by businesses.

Deadlines for VAT 

It is vital that you do not miss the deadline. Your accountant will ensure this does not happen. For submission, the deadline is due on the first calendar month including the seven days duration following your VAT end period. Every business is different, and your period end can be monthly, quarterly, twice a year or annually.

Making Tax Digital for VAT 

From April 2019, all VAT-registered businesses with a taxable turnover above the threshold (£85,000) are now required to keep digital VAT business records. Every business with a turnover exceeding the current threshold will have to now ensure that their records are kept digitally. Businesses with a taxable turnover below the threshold are welcome to sign up on a voluntary basis for MTD.

Our team at A&C have helped many existing and new clients prepare for MTD. Ann, our dedicated client manager uses the latest Making Tax Digital compatible software to ensure you are effectively prepared for MTD.

We offer a wide range of VAT services, including in-house training, tax returns and compliance, and investigation support.

money
By AC Accounts Insights • Making Tax Digital 0 Comments

Does your accounts system comply with making tax digital for vat?

Making Tax Digital (MTD) for VAT is scheduled to start in April 2019 which means that your VAT information needs to be submitted to HMRC digitally.
On 18 December 2017, HMRC published draft legislation together with examples of how the business account records might link with the HMRC computer in order to comply with MTD for VAT. The legislation specifies that “functional compatible software” must be used to record and preserve prescribed VAT related data.

What are Digital records?

“Functional compatible software” must be used to calculate the VAT due, report the VAT figures (as per the current VAT return) to HMRC, and to receive information back from HMRC.
VAT related data for each sale and purchase made by the business includes the time of the supply, the value and the rate of VAT charged, or in the case of purchases, the amount of input VAT allowed.
There is no requirement in the draft regulations that the electronic recording of this data must be done at the time the supply is made, or when the purchase is received. As long as the data is recorded electronically by the earlier of the date that the VAT return must be submitted, or is actually submitted.
Digital Links in the Trail
The business can use more than one piece of software to keep its digital records, but those separate software programmes must be “digitally linked”. HMRC provides examples of what it means by digitally linked in the draft notice.

One example is a business which uses one piece of accounting software to record all sales and purchases, this software then calculates the return and submits it to HMRC. As well as the records in the accounting software the business uses a spreadsheet to keep track of a fleet of cars and work out its road fuel scale charges. The draft guidance suggests that the business can type the adjustment into its accounting software.

We can of course work with you to make sure that your accounting systems will comply with the new VAT rules before they start in 2019. Note that MTD for VAT will not be mandatory where turnover is below the VAT registration limit, currently £85,000 per annum.