MTD for self employed

MTD, or Making Tax Digital is here, and its's here to stay. Do you know what exactly does it mean to you? Are you MTD ready?

Do I need to follow the MTD rules already?

To answer this question, we need to first make a distinction between VAT MTD and Personal Income Tax MTD. Deadlines and thresholds are different for these two.

MTD for VAT

Every VAT registered business with a turnover of £85,000 or more is now required to register for MTD. If your turnover is below that threshold, you can still register for MTD if you choose to.

All VAT registered businesses, regardless of the turnover, will be required to register for MTD from 1st of April 2022.

MTD for Income Tax

Currently, you can follow the Income MTD rules voluntarily. You will have to follow Income MTD after 6 April 2023 if your taxable income from your self-employed business or your income from the property is more than £10,000

What does MTD mean to me?

It means, that once you register for MTD rules, you will need to keep all your records, file your VAT returns, and do your Self Assessment digitally. You can do it by using an MTD compatible software, or using a spreadsheet and an MTD bridging software. You can search for a compatible software at HMRC's website. Here is the link: https://www.gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-vat.

So I will now have to pay to use a software, but I used to do it on my own for free. It doesn't seem fair to me.

Luckily, there is some software available for free, and you can also find information about it on HMRC's website. Even if you choose a paid software, you will most probably get value for the money you pay. There are some really good pieces of software out there, that will make your life much easier and take your VAT and Self Assessment headaches away.