Making Tax Digital (also known as MTD) is the UK government’s programme to move the tax system online. It basically does what it says on the tin – rather than filing annual tax returns, businesses will use a digital tax account which they update regularly.
This process is made simpler through using Financial Management Software (FMS) solutions, such as Sysynkt. BDI is running a free series of webinars demonstrating key features of Sysynkt, including the Expenses Management, Purchase Management, and Open Banking capabilities. Learn more about how you can reduce administration time on your financial processes through a true cloud and affordable solution – book your free tickets today.
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What is MTD?
Making Tax Digital is a UK government programmed, designed to transform and digitalise the tax system. It involves fundamental changes to the way the tax system works. In theory, tax administration becomes more effective, more efficient, and easier for individuals as a result.
These changes therefore make the tax process simpler for individuals and businesses.
How and why was MTD developed?
After assessing the latest tax gap figures, the HMRC and UK government concluded that the current tax process is too confusing for users.
In fact, it is estimated that avoidable mistakes cost the exchequer a total of £8.5 billion in the tax period 2018-19.
Through implementing digital technologies, MTD is less error-prone than the previous tax process. For example, the improved data accuracy provided by digital records, combined with the built-in support from FMS software, and the removal of transposition errors through direct submission to HMRC reduces the amount of tax lost to avoidable errors.
Four basic foundations of Making Tax Digital
The principles of MTD come down to four basic foundations. These include:
What does MTD mean in practice?
Knowing how MTD works means your organisation can be better prepared to comply with it.
For example, MTD means that the tax process changes and businesses must provide information more frequently. Businesses must therefore change their mindsets and think of their financial data as a digital stream rather than a compilation pulled together at multiple points throughout the year.
This therefore means changes in the expenses submissions process. Rather than bulk receipt submissions, organisations will be required to use approved software to maintain digital transaction records. These records must include information such as amount, date charged, and category.
The invoicing process must also change. Providing financial information to HMRC requires invoicing to happen more regularly, and therefore more quickly. This includes passing invoices through any necessary internal checks, such as in-house accountants. Cloud-based accounting is useful in this regard, making it easy for accountants to access information as it becomes available.
Who needs to follow MTD rules?
The deadline for MTD compliance varies depending on the size of the business. The first changes introduced with MTD applied to VAT-registered businesses above the £85,000 VAT threshold. These businesses must now use digital methods to store and submit their VAT information to HMRC.
If your organisation is below this level, you can still voluntarily partake before the deadline for your VAT band.
|VAT-registered business with over £85,000 in taxable turnover||Should already be using MTD|
|VAT-registered business with under £85,000 in taxable turnover||First return starting on or after 1st April 2022|
|Self-employed businesses with annual turnover above £10,000||Next accounting period after 6th April 2023|
|Landlords with annual property turnover above £10,000||Next accounting period after 6th April 2023|
How Sysynkt can help
Even if your organisation is not close to the VAT threshold for the next deadline, you should still consider using digital accounting software (such as Sysynkt) to record business transactions.
Sysynkt is an innovative new cloud-based Financial Management System (FMS) that sits above your existing ERP software. Built from the ground up to include the latest developments in technology and the business sector, Sysynkt will streamline and revolutionise your organisation’s financial management. It is also fully FCA and HMRC authorised.
With open banking integration, automated AI invoicing procedures via Google AI, and customisable graphic workflow processes, Sysynkt updates your business processes. Full customisation options also means Sysynkt meets all of your organisation’s needs.
Sysynkt & BDI
BDI is running a series of free webinars as part of The Summer of Sysynkt. Join our business experts as we explore key features and functionalities of the software, including Purchase Management, Expenses Management, and Open Banking.
Unlike many FMS software solutions, Sysynkt is an affordable option for any sized organisation. Sysynkt is sold on an SaaS basis, where users only pay for the modules and transactions they need. We like to think of it like a mobile phone contract – you only pay for the transactions your organisation will actually use. Furthermore, unlimited user licenses mean that everybody within your team can access whichever modules they need.
Access your financial data from any location and any device via Sysynkt. Join BDI for our webinar, and see how Sysynkt can work for your organisation today.
If you are interested in what Sysynkt can do for your organisation, we have a range of resources available. An on-demand webinar is available on BDI’s YouTube channel, providing a demo of Sysynkt’s core features. Alternatively, a free eBook covering Sysynkt’s modules is available to download.
For further information, please contact one of our business experts. We would welcome the opportunity to discuss your business needs and goals.
Let’s start the journey of using data intelligently.