Making Tax Digital (MTD) has been a hot topic in the UK small business community. With the new system set to be implemented in April 2022, there has been a lot of confusion and misinformation circulating. As a small business owner, it’s important to understand what MTD is and how it will affect your business. In this article, we will bust 9 common myths about Making Tax Digital and provide you with accurate information to help you prepare for the upcoming changes.
Myth 1: MTD is a new tax
One of the biggest misconceptions about MTD is that it is a new tax. This is simply not true. MTD is a new way of submitting tax returns to HM Revenue and Customs (HMRC). It aims to make the tax system more efficient and reduce errors by digitizing the process.
Myth 2: MTD only applies to VAT registered businesses
While MTD initially only applied to VAT registered businesses with a turnover above the VAT threshold, it will now be extended to all businesses from April 2022. This means that all businesses, regardless of their size or turnover, will be required to submit their tax returns digitally.
Myth 3: MTD will require businesses to submit tax returns more frequently
Another common misconception is that MTD will require businesses to submit tax returns more frequently. This is not the case. The frequency of tax returns will remain the same, with businesses still required to submit them annually. The only change is that they must be submitted digitally using MTD-compatible software.
Myth 4: MTD will increase the amount of tax businesses have to pay
Some business owners fear that MTD will result in them paying more tax. This is not true. MTD will not change the amount of tax businesses are required to pay. It is simply a new way of submitting tax returns.
Myth 5: MTD is only for large businesses
Another common myth is that MTD only applies to large businesses. This is not true. MTD applies to all businesses, regardless of their size. However, small businesses with a turnover below £85,000 will have the option to voluntarily sign up for MTD.
Myth 6: MTD is too complicated and will be difficult to comply with
Some business owners are concerned that MTD will be too complicated and difficult to comply with. However, HMRC has provided support and guidance to help businesses transition to the new system. There are also a variety of MTD-compatible software options available to make the process easier.
Myth 7: MTD is only for businesses in the UK
MTD applies to all businesses that are required to pay UK taxes. This includes businesses based outside of the UK but have a UK taxable presence.
Myth 8: MTD will replace the need for accountants
MTD will not replace the need for accountants. While businesses will be required to submit their tax returns digitally, they will still need the expertise of accountants to help with other financial aspects of their business.
Myth 9: MTD is optional
MTD is not optional. It is a mandatory requirement for all businesses from April 2022. Businesses that do not comply with MTD may face penalties from HMRC.
In conclusion, it’s important for small business owners to have a clear understanding of MTD and how it will affect their business. While there may be some misconceptions and confusion surrounding the new system, it’s crucial to stay informed and prepare for the upcoming changes. HMRC has provided resources and support to help businesses make a smooth transition to MTD. Embracing this new digital system will not only make tax submissions more efficient but also help businesses stay on top of their finances. Don’t let the myths deter you, get ready for MTD and take your business to the next level.
