Making Tax Digital: How to Submit

The implementation of the Making Tax Digital (MTD) initiative is intended to make submitting tax returns simpler and less error-prone by moving the process to online systems. As it is rolled out, it will be mandatory for more companies to switch to HMRC-compliant software. 

Both new and existing businesses will need to understand how to set up and submit taxes via MTD as it becomes mandatory over the coming years. In this guide, we will highlight what you will need to consider when aligning with MTD.

What is MTD and who does it affect?

In an effort to make tax submission and organisation more streamlined and efficient, HMRC began the MTD initiative with the goal of requiring all businesses to submit their tax returns using digital accounting software that can be linked with their systems. This will allow automatic tax payments without the need for direct debits, and it will calculate and break down finances in a comprehensive way using dedicated software. 

While MTD will invariably have long-term benefits, the more immediate challenge to  businesses is the process of investing in, setting up, and learning how to use new accounting software.

Employing the services of a professional accountant will make this process easier. At Monetta, we provide financial advice and support for many businesses. If you are on the fence about hiring an accountant, or are unsure what accounting software to invest in, call us or fill in our quick online form.

Do I need to submit taxes digitally?

Depending on what tax you are intending to submit in compliance with MTD, you may not have to worry about it for a few years, but it is worth being prepared.

• Currently, businesses must submit VAT returns digitally if they earn over £85,000, and this must be done using accounting software. With the right accounting software, it will be possible to set up tax returns automatically, meaning your finances will be calculated for you;
• From 1 April 2022, businesses of all sizes will have to submit their VAT tax returns digitally through accounting software;
• From 1 April 2024, unincorporated businesses and landlords that have a turnover of more than £10,000 per year will be required to submit income tax returns digitally through accounting software. This means that individuals will need to maintain records and submit them to HMRC themselves, so it may be worth employing an accountant; and
• From 1 April 2026, incorporated businesses will be required to pay corporation tax digitally through accounting software.

How can I submit taxes digitally?

The main thing you will need when submitting tax digitally is accounting software that can connect to HMRC’s systems. Alternatively, if you use spreadsheets or other software that is not compatible, there are bridging software programs that can support this connection, but these may require some further setting up. For an extensive list of HMRC-compliant software, use this government resource.

You must also sign up to MTD. If you are an accountant working for a business, you will need to make a separate Agent Services account.

• If you are looking to sign your business up to MTD, visit this government website page;
• If you are an accountant looking to sign up to MTD on behalf of a company that you work for, visit this government website page.

Once registered, you will receive an email with confirmation, and you will then be able to organise payments from your MTD account on the government website. It is essential that you do not try to pay a tax return if you already have a direct debit up and running that is due to be paid within seven days either side of registering for MTD, as this may cause you to pay the return twice. Equally, do not submit a return until you have received your confirmation email.

This process may change as new rules are introduced for the other types of tax, so you should ensure you keep up to date with future developments to avoid tax-paying errors.

Monetta can help

We understand that getting set up for the MTD initiative can feel overwhelming for some business owners. If you are not sure where to start, or want to make sure that you are fully compliant, get in touch with our professional business accountants or fill in our quick contact form and a friendly member of our team will get in touch.