As you already know, MTD (Making Tax Digital) was HMRC’s project to digitise the taxation system in the UK. MTD made a big splash when it was announced, and we even covered it for a very long time on our social media channels and on our blog. However, it seems that HMRC had a change of mind on when MTD should become mandatory and even announced a new threshold.
If you didn’t already know, this is not the first time a delay to make MTD mandatory was made. MTD was supposed to become mandatory in 2018, then again in 2024, and now the latest amendment was set to 2026. That’s not the only change, the threshold that made landlords and the self-employed eligible to register and use the platform was starting at £10,000. This too is changed alongside the latest delay in MTD use. The new threshold starts at £50,000. However, HMRC said that individuals whose income falls between £30,000 and £50,000 would need to use MTD in April 2027.
Most landlords and the self-employed were netted with this announcement. If the pervious £10,000 threshold was kept the way it was, this would have caused 4 million UK tax payers to register & use the MTD platform. However, with the most recent changes, only 700,000 will be eligible for MTD within the new threshold.
One major reason HMRC decided to make the latest changes was the cost of living crisis within the current turbulent economy. The tax body wanted to provide support for landlords and self-employed individuals by delaying MTD and increasing the threshold.
There are countless reasons why you should be digitising your financial processes through an accounting software. And we can begin with the obvious and say that sooner or later you would be required to digitise by the law. However, we want you to know all the benefits you would receive from this digitisation.
Firstly, you would be able to learn so much more from your accountant. Once you digitise your financial processes, your accountant can quickly prepare readable reports about your business’s health and its performance through the accounting software programme.
Secondly, you will be using an MTD-compatible software even if that is before MTD becomes mandatory for your threshold. Why is that beneficial? You will have the skills, he training from your accountant to utilise the accounting software and know your business inside out!
Thirdly, your financial processes will be automated and optimised through the software, saving you additional costs, time, or energy spend trying to figure out who you need to pay and who needs to pay you. Not to mention you don’t need to keep your receipts because you can simply take a picture of a receipt and upload it to your software through your phone.
If you are new to Elena Meskhi & Co, you might not be aware that we always recommend technology and the use of the accounting software. At this moment, there are tens of accounting software that you could be using but you need to be mindful of a couple of things. The first is staring to use MTD compatible software, even if MTD is not mandatory for you at this stage. The second is you need an accountant’s support even if you use the software.
Some business owners think that as long as they can smoothly use the software, then there’s no need for an accountant. Here’s why that’s a false assumption. Placing the numbers on the software, and knowing how to automate doesn’t make you an accountant. You could be saving so much money if you hired and accountant and have fewer errors. Because accountants have had to study, get certified, and have years of experience and get certified to use the accounting software as well!
Reach out to our team at Elena Meskhi & Co for support with using accounting software and preparing for MTD.