By Candour Accounts Ltd – Your partner for compliant, efficient digital tax and payroll
What is Making Tax Digital (MTD)?
Making Tax Digital (MTD) is HMRC’s initiative to modernise the UK tax system by requiring businesses to keep digital records and submit returns using compatible software. MTD aims to reduce errors, improve accuracy and give businesses near-real-time visibility of their tax position.
Who does MTD apply to today?
- VAT: All VAT-registered businesses must keep digital records and file VAT returns via MTD-compatible software.
- Income Tax Self Assessment (MTD ISA): Will apply to most unincorporated businesses and landlords above HMRC’s income thresholds from phased future dates. Planning ahead is now wise.
- Corporation Tax: MTD for CT is not yet mandated, but it’s on HMRC’s roadmap. Early adoption brings process and data benefits.
Note: HMRC periodically updates timelines and thresholds – stay current or ask us for the latest.
Why MTD matters for SMEs
- Fewer errors: Digital links reduce manual re-keying and spreadsheet copy-paste mistakes.
- Time saving: Automated bank feeds, rules and reconciliations make bookkeeping faster.
- Better decisions: Up-to-date numbers support cash-flow management, pricing and planning.
- Compliance confidence: Avoid penalties and keep pace with HMRC requirements.
What MTD requires (in plain English)
- Digital record-keeping: Keep your sales, purchases and VAT/tax data in approved software or digitally linked spreadsheets.
- Digital links: Data must flow between systems without manual re-entry (CSV imports, APIs and compliant bridging tools are acceptable).
- MTD-compatible submissions: File VAT and (in due course) income tax updates via software that connects to HMRC.
Choosing the right software
We recommend and support MTD-compatible platforms with proven SME results, especially:
- Xero: Excellent bank feeds, rules and app ecosystem; strong for service businesses and multi-entity groups.
- Sage Business Cloud Accounting: Robust UK compliance heritage; great for growing SMEs needing structured workflows.
- MTD bridging: For teams that prefer spreadsheets but need compliant submissions.
- Add-ons: Receipt capture apps, payment solutions, reporting tools and payroll integrations.
Tip: We’ll align Xero or Sage to your volume, sector specifics (e.g. CIS, retail POS) and internal approvals to ensure smooth digital links.
Our MTD implementation approach
- Discovery: Quick review of your current bookkeeping, VAT profile and reporting cadence.
- System design: Recommend a best-fit stack in Xero or Sage, with the right add-ons and digital links.
- Migration: Clean data, import opening balances, map your chart of accounts and set tax codes correctly.
- Automation: Set up bank feeds, rules, invoice templates, receipt capture and approval flows.
- Training: Practical walkthroughs for your team; simple SOPs for month-end and quarter-end.
- Compliance checks: Test submissions and confirm digital-link integrity.
- Ongoing support: Quarterly reviews, VAT prep, helpdesk and optional managed bookkeeping/payroll.
MTD for VAT: key points
- Maintain digital records for outputs, inputs and adjustments.
- Submit VAT returns through compliant software every period – directly from Xero or Sage where appropriate.
- Ensure a full digital audit trail from source document to submission.
Common pitfalls we fix: Manual journals without digital links, disjointed spreadsheets and late filings caused by missing automations.
MTD for Income Tax (ITSA): getting ahead
- Quarterly updates will require more frequent bookkeeping discipline.
- Separating business and personal transactions becomes critical.
- Landlords: set up property-by-property records for accuracy and relief tracking.
Our prep plan: Pilot your quarterly process now in Xero or Sage, standardise categorisation and use dashboards to manage cash payments on account.
Benefits beyond compliance
- Real-time cash flow: With bank feeds and rules, you can forecast and act sooner.
- Insightful reporting: Custom dashboards for gross margin, debtor days and VAT liability.
- Scalability: A clean digital stack in Xero or Sage supports growth, funding and due diligence.
FAQs
Do I need to switch from spreadsheets?
Not necessarily. With the right bridging software and digital links, spreadsheets can remain part of your workflow – though moving fully to Xero or Sage usually yields the best efficiency.
What if I’m partially compliant?
We’ll run a quick compliance gap check to identify issues and prioritise fixes.
How soon can we go live?
Most migrations complete within 2-6 weeks depending on data quality and complexity.
How Candour Accounts can help
- MTD Readiness Review: A concise audit of your records, software and digital links.
- Software Setup & Migration (Xero/Sage): We configure, cleanse and connect your data with best-practice tax settings.
- Quarterly & VAT Support: We handle submissions or coach your team to self-serve.
- Training & SOPs: Role-based guides so your team stays compliant and efficient.
We support SMEs across accounting, tax, payroll and planning. If you’d like us to assess your MTD position or upgrade your Xero/Sage stack, we’re here to help.
Get started
Contact our team to book an MTD Readiness Review.
- Phone: 01775 765050
- Email: info@candouraccounts.co.uk
- Address: Endeavour House, 7 Enterprise Way, Pinchbeck, Spalding, Lincolnshire, PE11 3YR
- Website: www.candouraccounts.co.uk
Regulated by the Institute of Chartered Accountants in England and Wales for investment business activities. Company No. 9646668. VAT No. 216 4375 17.