Next year, over a million small businesses will have to comply with Making Tax Digital for VAT. This post has been written for three reasons:

  1. To help you understand whether you need to comply with MTD for VAT
  2. Show you how to sign up
  3. Advise you on getting ready for the change

What is Making Tax Digital?

Before we start, it’s a good idea to clarify what Making Tax Digital is. In essence, it’s about moving to a system of digital tax records and returns. In a few years’ time, MTD will apply to VAT, Income Tax and Corporation Tax. You can learn all about MTD from our dedicated resource, What is Making Tax Digital? A Guide. 

Who has to register for Making Tax Digital for VAT?

VAT-registered businesses with a turnover of over £85,000 have had to comply with MTD since 2019.

However, from April 2022, VAT-registered businesses with a turnover of under £85,000 will also have to become part of the scheme.

In other words, if you charge VAT and you’re not already part of Making Tax Digital, you need to comply with it by no later than April 2022.

How do I register for Making Tax Digital for VAT?

If you’re a THP client, the simplest way to sign up is to let us do it for you. Before we do this, you will need compatible accounting software (we’ll talk about this shortly).

Alternatively, if you want to sign up yourself, you can follow HMRC’s advice on this page.

Where can I get MTD compatible software?

There are many different cloud accounting packages that are compatible with MTD. HMRC publishes a list of software that has been through its recognition process.

That said, it usually makes sense to use software that your accountant is familiar with. At THP, we are experienced in using a range of cloud accounting packages, but we particularly recommend Xero or Freeagent. Xero is better for larger businesses, while FreeAgent is more suitable for freelancers, contractors or smaller businesses.

What do I do next?

If you’re a THP client, do get in touch if you need any help or advice.

However, whether you need to register for MTD for VAT or you don’t, now is a good time to start exploring cloud accounting software packages. It’s only a matter of a time before we have to comply with MTD for Income Tax and Corporation Tax. So the earlier you start using compatible software, the easier the change will be!

Need further advice on any of the topics being discussed? Get in touch and see how we can help.

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About Karen Jones

Having worked for one of the world’s largest accountancy firms, Karen Jones uses her tax knowledge and skills to help clients obtain substantial reductions to their tax liabilities.

With an expanding portfolio of tax clients, Karen enjoys the variety her work brings her and particularly likes working with new businesses and people. With a growing number of tax clients, she frequently faces a variety of challenges and relishes the experience she gains as she solves them.

Karen likes the THP ethos: “I like the way the team has a professional, but friendly and down-to-earth approach – it creates a productive atmosphere that benefits everyone.”

Karen’s specialist skills:

  • Personal Taxation
  • Tax Efficient Planning
  • Trust Administration
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