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Making Tax Digital (MTD): A Complete Guide for Businesses and How Accountants Can Help

Chris White • December 29, 2024

Making Tax Digital: What It Means for You and How to Prepare

Making Tax Digital (MTD) represents one of the biggest shifts in UK tax reporting in decades. Starting from April 2026, businesses and landlords will be required to adopt new digital processes for tax reporting. This guide will help you understand what MTD is, how to prepare, and how accountants and bookkeepers can support you every step of the way.


What is Making Tax Digital (MTD)?

MTD is a government initiative aimed at modernizing the UK tax system. By keeping digital records and submitting updates to HMRC through approved software, MTD aims to:

  • Reduce errors caused by manual record-keeping.
  • Provide real-time tax insights to help businesses manage their finances.
  • Simplify the tax return process.


Who Does MTD Apply To?

  • From April 2026, self-employed individuals and landlords with a turnover exceeding £50,000 will be required to comply.
  • In April 2027, the threshold will lower to £30,000.
  • Voluntary participation is open to anyone, regardless of turnover, if they meet the technical requirements.


How MTD Works

  1. Digital Record-Keeping: Use MTD-compliant software to record all income and expenses in real-time.
  2. Quarterly Updates: Submit summaries of income and expenses to HMRC every three months.
  3. Year-End Declaration: Finalize your accounts and adjust for any claims, reliefs, or corrections before submitting a simplified year-end declaration.


How Bookkeepers and Accountants Can Help

1. Software Selection and Setup
Accountants and bookkeepers can help you choose the right
MTD-compliant software for your business needs, whether it’s a cloud-based solution, bridging software, or tools that integrate with spreadsheets. They’ll also set up the software and train you on its use.

2. Maintaining Accurate Digital Records
Transitioning to digital records can be daunting. Bookkeepers can take the lead in recording your transactions and ensuring compliance with HMRC’s requirements.

3. Quarterly Submissions
Quarterly updates may seem overwhelming, but your accountant can manage these submissions on your behalf, ensuring your figures are accurate and submitted on time.

4. End-of-Year Adjustments
Your accountant will handle any adjustments for reliefs, claims, or corrections and prepare your final declaration to HMRC, streamlining the tax filing process.

5. Guidance on Compliance and Thresholds
Accountants can review your financials to determine if you’ll exceed the turnover thresholds and ensure you’re prepared to comply. They can also assist in applying for exemptions if you qualify.


Benefits of MTD for Businesses

  • Reduced Errors: Digital processes minimize mistakes often caused by manual calculations.
  • Improved Financial Insights: Real-time tracking of income and expenses helps with better business planning.
  • Streamlined Processes: Quarterly updates make tax filings more manageable and less rushed at year-end.


Why Sign Up for Voluntary Testing?

Voluntary participation in MTD testing offers several advantages:

  • Hands-on Experience: Get familiar with the system before it becomes mandatory.
  • Dedicated HMRC Support: Access direct assistance for any issues during the testing phase.
  • Penalty-Free Submissions: No penalties for late or incorrect quarterly updates during the testing period.


FAQs About MTD

Q: Can I opt out of MTD?
A: Opting out is only possible in certain cases, such as digital exclusion due to age, disability, or remote location.

Q: What if I have income from multiple sources?
A: You’ll need to submit separate quarterly updates for each income source, such as self-employment and property.

Q: What happens if my turnover falls below the threshold?
A: Once mandated, you’ll remain in the system for at least three years, even if your income drops below the threshold.


Next Steps

If you’re unsure how MTD will affect your business or need help transitioning, bookkeepers and accountants are here to support you. They can guide you through compliance, manage submissions, and help you stay ahead of deadlines.

๏ปฟ

Contact Us
At
CW Licensed Bookkeeper & Accountant, we’re ready to help you prepare for MTD with personalized advice and solutions tailored to your business. Reach out to us at info@cwabc.co.uk or 07306 812321.

By Chris White January 17, 2025
MTD ITSA FAQ – Everything You Need to Know
By Chris White January 17, 2025
Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is a major shift in the way self-employed individuals and landlords in the UK manage and report their taxes. This government initiative aims to modernize the tax system, reducing errors and streamlining the process. If you’re self-employed or a landlord, MTD ITSA will affect how you record your income and file tax returns. Here’s everything you need to know about what it is, how it will impact you, and how to prepare for the change. What Is MTD ITSA? MTD ITSA stands for Making Tax Digital for Income Tax Self Assessment . It builds on the government’s Making Tax Digital initiative, which is already in place for VAT. MTD ITSA focuses on digitizing how self-employed individuals and landlords report their income tax. Under MTD ITSA, you’ll need to: Keep digital records of your income and expenses. Submit quarterly updates to HMRC using MTD-compatible software. File an End of Period Statement (EOPS) and a Final Declaration to confirm your annual income and tax obligations. Who Does MTD ITSA Apply To? MTD ITSA will roll out in phases: April 2026 : Applies to self-employed individuals and landlords with an annual income exceeding £50,000. April 2027 : Expands to those earning between £30,000 and £50,000 annually. Future plans for individuals earning below £30,000 are still under consultation, so it’s essential to stay updated. How Will MTD ITSA Affect You? Digital Record-Keeping If you currently use spreadsheets or paper records, you’ll need to switch to MTD-compatible software to maintain digital records. Quarterly Reporting Instead of submitting one annual Self Assessment tax return, you’ll file four quarterly updates summarizing your income and expenses. End-of-Year Submissions You’ll still finalize your accounts at year-end, but the process will be streamlined with digital tools. More Transparency With quarterly updates, you’ll have a clearer view of your tax obligations, reducing surprises at year-end. What Do You Need to Do to Prepare for MTD ITSA? Check if MTD ITSA Applies to You Review your annual self-employment or rental income to determine when you’ll need to comply. Choose MTD-Compatible Software Popular options include QuickBooks, Xero, and FreeAgent. We can help you select and set up the right software for your business. Organize Your Records Ensure your income and expenses are up to date and transition from paper records to digital systems. Learn the New Process Understand how to submit quarterly updates, End of Period Statements, and the Final Declaration. Seek Professional Advice Navigating MTD ITSA can be challenging, especially if you’re new to digital accounting. A trusted bookkeeper can guide you through the process and ensure you remain compliant. How CW Licensed Bookkeeper & Accountant Can Help At CW Licensed Bookkeeper & Accountant, we understand that MTD ITSA can feel overwhelming. That’s why we’re here to make the transition as smooth as possible. Here’s how we can support you: Tailored Advice We’ll help you understand how MTD ITSA impacts your specific situation and create a plan to ensure compliance. Software Setup and Training We’ll assist in choosing, setting up, and training you on the best MTD-compatible software for your needs. Quarterly Reporting Support Let us handle your quarterly updates to HMRC so you can focus on running your business. Year-End Submissions From the End of Period Statement to the Final Declaration, we’ll ensure your year-end reporting is accurate and timely. Ongoing Support We’re here to answer questions, provide troubleshooting, and keep you on track with MTD requirements. ๏ปฟ Get Ready for MTD ITSA Today! MTD ITSA is a significant change, but you don’t have to navigate it alone. With CW Licensed Bookkeeper & Accountant by your side, you can make the transition stress-free and compliant. ๐Ÿ“ง Contact us today at info@cwabc.co.uk ๐Ÿ“ž Call us on 07306 812321 Let us help you prepare for the future of tax reporting!
By Chris White December 4, 2024
๐ŸŽต On the first day of Christmas, my accountant sent to me: A client with a shoebox of receipts! ๐ŸŽต On the second day of Christmas, my accountant sent to me: Two tax deadlines, And a client with a shoebox of receipts! ๐ŸŽต On the third day of Christmas, my accountant sent to me: Three missing invoices, Two tax deadlines, And a client with a shoebox of receipts! ๐ŸŽต On the fourth day of Christmas, my accountant sent to me: Four bank mismatches, Three missing invoices, Two tax deadlines, And a client with a shoebox of receipts! ๐ŸŽต On the fifth day of Christmas, my accountant sent to me: Fiiiiiive… late… PAYE!!! Four bank mismatches, Three missing invoices, Two tax deadlines, And a client with a shoebox of receipts! ๐ŸŽต On the sixth day of Christmas, my accountant sent to me: Six overclaimed expenses, Fiiiiiive… late… PAYE!!! Four bank mismatches, Three missing invoices, Two tax deadlines, And a client with a shoebox of receipts! ๐ŸŽต On the seventh day of Christmas, my accountant sent to me: Seven QuickBooks glitches, Six overclaimed expenses, Fiiiiiive… late… PAYE!!! Four bank mismatches, Three missing invoices, Two tax deadlines, And a client with a shoebox of receipts! ๐ŸŽต On the eighth day of Christmas, my accountant sent to me: Eight petty cash errors, Seven QuickBooks glitches, Six overclaimed expenses, Fiiiiiive… late… PAYE!!! Four bank mismatches, Three missing invoices, Two tax deadlines, And a client with a shoebox of receipts! ๐ŸŽต On the ninth day of Christmas, my accountant sent to me: Nine reconciliations, Eight petty cash errors, Seven QuickBooks glitches, Six overclaimed expenses, Fiiiiiive… late… PAYE!!! Four bank mismatches, Three missing invoices, Two tax deadlines, And a client with a shoebox of receipts! ๐ŸŽต On the tenth day of Christmas, my accountant sent to me: Ten direct debits missing, Nine reconciliations, Eight petty cash errors, Seven QuickBooks glitches, Six overclaimed expenses, Fiiiiiive… late… PAYE!!! Four bank mismatches, Three missing invoices, Two tax deadlines, And a client with a shoebox of receipts! ๐ŸŽต On the eleventh day of Christmas, my accountant sent to me: Eleven VAT adjustments, Ten direct debits missing, Nine reconciliations, Eight petty cash errors, Seven QuickBooks glitches, Six overclaimed expenses, Fiiiiiive… late… PAYE!!! Four bank mismatches, Three missing invoices, Two tax deadlines, And a client with a shoebox of receipts! ๐ŸŽต On the twelfth day of Christmas, my accountant sent to me: Twelve sleepless nights, Eleven VAT adjustments, Ten direct debits missing, Nine reconciliations, Eight petty cash errors, Seven QuickBooks glitches, Six overclaimed expenses, Fiiiiiive… late… PAYE!!! Four bank mismatches, Three missing invoices, Two tax deadlines, And a client with a shoebox of receipts! ๐ŸŽ„๐Ÿงพ Cheers to the bookkeepers keeping it all together—mostly! ๐ŸŽ„ ๐ŸŽ„ As the holidays roll in, so does the end-of-year financial chaos! Bookkeepers and accountants often feel like they're living through their own version of the "12 Days of Christmas." With that in mind, here's a humorous breakdown of the realities we face—perfect for our clients to appreciate the juggling act behind the scenes. Day 1: A Client with a Shoebox of Receipts The Reality: This classic trope never gets old—or easier. Shoeboxes filled with crumpled, fading receipts are the bane of a bookkeeper’s existence. Pro Tip for Clients: Switch to digital receipt storage! Apps like Dext or Hubdoc can save you (and us!) hours of work. Day 2: Two Tax Deadlines The Reality: Tax deadlines seem to multiply like rabbits, and missing one can mean penalties. Whether it’s VAT or income tax, the clock is always ticking. Pro Tip for Clients: Mark your calendar now and get your documents in early—we’ll make sure you stay penalty-free. Day 3: Three Missing Invoices The Reality: A missing invoice means chasing payments, which affects cash flow and makes reconciliation a nightmare. Pro Tip for Clients: Stay organized with invoicing software. Send reminders to clients, and always save digital copies. Day 4: Four Bank Mismatches The Reality: Reconciling bank accounts can feel like solving a mystery. When transactions don’t match, it’s hours of detective work. Pro Tip for Clients: Regularly review your statements and report discrepancies immediately to avoid delays. Day 5: Fiiiiive… Late… PAYE!!! The Reality: Late payroll submissions lead to fines and disgruntled employees. It’s a big red flag in any business. Pro Tip for Clients: Automate PAYE submissions with payroll software to keep everything on track. Day 6: Six Overclaimed Expenses The Reality: Overclaimed expenses lead to audits, penalties, and sleepless nights for everyone involved. Pro Tip for Clients: Only claim expenses that are clearly business-related. When in doubt, consult with us! Day 7: Seven QuickBooks Glitches The Reality: Tech is wonderful—until it’s not. Software glitches can throw off entire reports and cause endless frustration. Pro Tip for Clients: Regular updates and backups can prevent most issues. Let us troubleshoot if you’re stuck. Day 8: Eight Petty Cash Errors The Reality: Petty cash is the small but mighty troublemaker. Errors here often pile up unnoticed until year-end reviews. Pro Tip for Clients: Maintain a petty cash log and reconcile it weekly to avoid surprises. Day 9: Nine Reconciliations The Reality: Reconciliation isn’t just a task—it’s an art. Matching every penny is satisfying, but it’s no small feat. Pro Tip for Clients: Submit complete and accurate records regularly so we can keep your books clean. Day 10: Ten Direct Debits Missing The Reality: Untracked or canceled direct debits can lead to unpaid bills, which impacts your credit and vendor relationships. Pro Tip for Clients: Set reminders to review direct debits monthly and update your payment methods when needed. Day 11: Eleven VAT Adjustments The Reality: VAT adjustments are tricky. They require precision and deep knowledge of tax laws. Pro Tip for Clients: Keep thorough records of VAT-related transactions. If you’re unsure, let us handle it. Day 12: Twelve Sleepless Nights The Reality: End-of-year madness leads to late nights for bookkeepers and accountants everywhere. Deadlines, reconciliations, and audits take their toll. Pro Tip for Clients: Early preparation and consistent record-keeping can save everyone from holiday burnout. Final Thought: Bookkeeping may seem mundane, but it’s the backbone of your business's financial health. By staying organized and working with a licensed bookkeeper, you can avoid the chaos of “12 sleepless nights.” Get in Touch: Need help with any of the "12 Days of Bookkeeping"? Contact CW Licensed Bookkeeper & Accountant at info@cwabc.co.uk or 07306 812321. Together, we’ll keep your finances merry and bright!
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