Running a limited company comes with its fair share of responsibilities, and taxes are one of the biggest challenges.
If you’ve already been keeping up with your VAT or Corporation Tax returns, you know that the process can sometimes feel complicated and time-consuming.
Well, things are changing as HMRC is rolling out a new system known as Making Tax Digital (MTD)
If you want to find out more about why these changes are being made, check out this blog post.
What Exactly is Making Tax Digital (MTD)?
This is an initiative designed to bring the tax system into the digital age, and it’s going to affect how limited companies like yours manage tax filings. While the idea of switching to a fully digital process may seem daunting, the reality is that MTD aims to make your life easier by simplifying the tax filing process, reducing errors, and saving you time.
Whether you’re a seasoned business owner or just starting out, now is the time to understand what’s changing, how it will affect your business, and most importantly how to prepare for it.
When Will MTD Affect Limited Companies?
The transition to MTD for limited companies has been phased out over time, with key dates to keep in mind:
- April 2026: If your business turnover exceeds £85,000 and you’re VAT registered, you’ll need to comply with MTD for VAT.
- April 2027: The full rollout for MTD for Corporation Tax is expected, requiring limited companies with a turnover above £10 million to start submitting their Corporation Tax digitally. Smaller companies will eventually follow, but the specific timeline is still being finalised by HMRC.
It’s crucial to stay updated, as there could be adjustments to these deadlines based on HMRC’s progress.
How Will MTD Affect Your Tax Filing Process?
For limited companies, MTD affects VAT returns immediately, with Corporation Tax following soon after. Here’s how the changes will impact your business:
1. Keep Digital Records
MTD requires you to keep digital records of all business transactions, including sales, purchases, income, and expenses.
This means no more paper receipts, manual spreadsheets, or hand-written logs. Instead, you’ll use MTD-compliant software like Xero, Quickbooks or Sage, which automatically syncs with your bank accounts.
2. Submit Quarterly Updates
If your company is VAT-registered, MTD for VAT requires you to submit VAT returns quarterly through MTD-compliant software, which will automatically pull the necessary data from your records. This means no more manually entering data into HMRC’s online portal.
3. Corporation Tax Digital Filing (Coming Soon)
Starting in April 2027, your limited company will be required to submit Corporation Tax digitally. This will likely include quarterly updates, similar to VAT, where the software will help calculate and submit the necessary details to HMRC.
4. End of Year Final Declaration
At the end of the year, you will still need to submit an End of Period Statement for VAT (if applicable) and your final tax declaration for Corporation Tax. This will summarise the data from all the quarterly submissions throughout the year.
The Benefits of Embracing MTD
While MTD may seem like a big adjustment, it comes with several benefits, including;
Better Financial Visibility:
MTD’s digital approach gives you an up-to-date view of your company’s finances, so you won’t be caught off guard by any tax surprises.
The software helps you track income and expenses in real-time, giving you a clearer picture of your financial position..
Save Time Long Term:
Once your systems are set up and you’re familiar with the process, the quarterly updates will take less time than the traditional yearly tax scramble.
Plus, digital tools automate much of the work, leaving you with more time to focus on managing your team and growing your business.
Reduced Errors and Risks:
MTD-compliant software helps reduce common mistakes, such as input errors or missing information that could lead to HMRC inquiries or worse….penalties!
The software also automatically cross-checks calculations, so your tax returns are more accurate.
More Timely Support:
With MTD, accountants like Right Click Accounting can provide more proactive support throughout the year, helping you stay ahead of tax deadlines, identify potential savings, and avoid any compliance issues before they arise.
Common Concerns and Answers
It’s normal to have questions when something new comes your way, especially when it comes to managing your finances. We’ve compiled answers to some of the most common concerns our limited company clients have shared with us;
If you’re already using accounting software, it’s worth checking whether it’s MTD-compliant. Many popular platforms, like Xero or Quickbooks, have already made the transition.
If you’re using a non-compliant system, it’s time to make the switch. Right Click Accounting can help you find the best software for your business and guide you through the setup process.
While your current accountant may be helping you file tax returns, MTD requires you to maintain digital records and submit quarterly updates. You don’t necessarily need to change your setup, but you will need to ensure your accountant is familiar with MTD requirements.
At Right Click Accounting, we can collaborate with your current accountant to ensure a smooth transition.
It’s important to remember that improving your understanding of your business finances might actually help you save money through better tax planning and fewer errors.
Technical issues can happen, but most MTD-compliant software, comes with solid customer support and troubleshooting tools to help resolve problems quickly.
If you do encounter any issues, Right Click Accounting can step in to support you. As Certified Xero Experts, we ensure that any problems with your Xero software are sorted out efficiently and that your MTD submissions stay on track.
Prepare for MTD Success with Right Click Accounting
As the Making Tax Digital (MTD) rollout for limited companies approaches, now is the time to take action. The new requirements mean more than just keeping digital records; they impact how you manage VAT, Corporation Tax, and even how you interact with HMRC.
At Right Click Accounting, we understand that for limited companies, MTD isn’t just about compliance; it’s about streamlining your processes and staying ahead of the curve.
We’re here to guide you through the technicalities, from setting up the right MTD-approved software for your business type to managing your VAT and Corporation Tax updates quarterly, rather than the traditional annual submissions.
Our team knows that these changes can seem daunting, but we’re ready to provide ongoing support to help you adapt seamlessly. Whether it’s ensuring your digital records are watertight, guiding you through quarterly filings, or offering tailored advice on minimising your tax liabilities under MTD.
Get in touch today, and let us help you navigate the Making Tax Digital process smoothly and stress-free to make sure your business is future-proof and ready for the changes ahead!