By 1 November 2022, you need to be registered for Making Tax Digital (MTD) and make sure you have compliant software to submit your VAT returns.
By law, all VAT-registered businesses must sign up to MTD and use compatible software to keep their VAT records and file returns. HMRC issued a reminder, that if any VAT-registered small businesses are not using compliant software by the November deadline, they will not be able to use their existing VAT online account to submit their VAT returns.
Here you can find out what MTD is and how you can prepare before the November deadline.
What’s Making Tax Digital?
Making Tax Digital (MTD) is a government scheme designed to make it easier for people and businesses to track their tax by keeping and submitting digital records. The aim of MTD is to help businesses reduce errors when it comes to submitting returns while making it easier for them to manage their tax digitally.
Since 2019, VAT-registered businesses with a taxable turnover above the VAT registration threshold (currently £85,000) have needed to keep their records digitally and provide their VAT return information to HMRC through MTD-compatible software, like FreeAgent, Xero and Quickbooks.
According to the HMRC, more than 1.8 million businesses are already benefiting from the service, and more than 19 million returns have been successfully submitted through MTD-compatible software so far.
How can I prepare?
Sign up and submit your VAT return through MTD
If you are VAT registered and have not yet signed up to Making Tax Digital for VAT, you should do so now to ensure you are ready in time for the November 2022 deadline. You can find more information on how to sign up here.
You can ask for an extension if it’s not reasonable or practical for you to use computers, the software or the internet. HMRC has said they will consider each application on a case-by-case basis.
Find software that is compatible with Making Tax Digital
MTD is here to make it easier for you to file your VAT returns. The biggest part of that is using software that is MTD-compliant to do the heavy lifting for you.
You can get FreeAgent MTD for VAT-compatible accounting software for free with a Mettle account (eligibility criteria and terms apply). This not only can save you more than £150 a year but also more than just help with MTD requirements.
With a FreeAgent account, you can also:
Monitor cash flow and see when tax is due
Get a forecast of corporation tax to avoid surprises
View automated VAT returns and files in a single click
See the performance of your income, expenses, and profitability
Keep digital records
You’ll need to keep digital records of sales and purchases and ensure you issue correct VAT invoices. HMRC has more information on keeping VAT records.
What to do if your business is new?
If your business is new and hasn’t registered for VAT yet, then you will be automatically signed up for MTD when you do register for VAT. This will be done through the HMRC’s new VAT Registration Service (VRS).
HMRC says registering online will mean your business is fully compliant from day one. You will still need to get MTD-compliant software to be able to submit your VAT return (see above).
Making Tax Digital is here to make submitting your VAT returns easier. The deadline to register for MTD and get MTD-compliant software is just around the corner, so make sure you register in time.
