How to Solve the Challenges of Making Tax Digital
The MTD regulation at the heart of these challenges does require Self Assessment taxpayers approach tax differently. Instead of an annual tax return covering your income in the previous year, you’ll be sending an update every three months about your income and expenses in the current year. When you first join MTD, you'll face the transition between these two systems.
Although this can seem daunting, it should be a short term pain - much like other challenges, the quarterly updates will become quicker and easier over time and with practice. The upside is that you will be able to see a real-time tax liability estimate so you can save the right amount of money to pay your tax bill.
These benefits are largely as a result of the technology. Going digital can have a hugely positive impact, saving you time and reducing error - in fact a recent Lloyds Bank survey suggests that digitising well, can save you up to a day week in admin!
Use software!
Seeing as MTD quarterly summaries will need to be submitted digitally via HMRC-integrated software, good software will not only make the whole tax process quicker and more efficient, but also keep you up to date with your tax calculations and business growth.
For example, with APARI’s MTD-ready software, you can upload bank statements or a spreadsheet, allocate your transactions to MTD compliant categories and the software will do all the tax calculations for you. It’s also integrated into HMRC’s systems for instant, automated filing - the only thing that you will have to do outside of the software is paying your tax bill.
While software may help to solve the problem of MTD, most landlords and self-employed people aren’t yet ready to adopt MTD, and so will likely be putting the transition off until 2026. Then it will be mandatory. However, some people are already signing up to MTD with APARI's support and taking advantage of the grace period before it becomes a legal requirement. At APARI we have already seen a user through the whole MTD process, with their 19/20 return being submitted through MTD - safe to say by 2026, they will be fully prepared!
So how will you be managing the transition year between traditional Self Assessment tax returns and MTD?
Want to know more about MTD? We created the Ultimate Guide to Making Tax Digital for YOU!
