Making Tax Digital (MTD) is HMRC’s drive to shift every business’ finances into the digital era. Gone are the days of carefully stapled receipts and an annual scramble to submit figures; MTD heralds an age of “live” data and immediate information.

This major change is motivated by a need for greater accuracy in the data provided to HMRC. And with errors caused through traditional methods apparently costing the exchequer a whopping £8.5 billion each year, it’s easy to see the reasoning.

Though it’s looming large in the public eye now, MTD has been in existence for a few years already. Its phased rollout will encompass self-employed individuals and landlords from 6 April 2024. It’s also on the horizon for limited companies, though this won’t apply until April 2026, and plans are still under consultation.

From next April, therefore, all businesses, sole traders and landlords with a gross income of over £10,000 (i.e. almost all of us and, realistically, anyone owning a buy-to-let property) will be legally required to keep digital records in relation to their trading and property income. What this actually means is that rather than submitting an annual tax return, you’ll need to submit details of your profits to HMRC online, on a quarterly basis. Tax payments will continue to fall in January and July each year.

You’ll also need to submit an end-of-period statement, with a final declaration containing the various adjustments that accountants have to make. These are things more likely to be missed or overlooked by individuals and bank feeds, such as depreciation and other accounting adjustments.

Though MTD is clearly designed to suit HMRC (naturally making some a little wary), it’s worth keeping an open mind. Just because it serves HMRC, doesn’t mean it can’t also serve you. Despite this, the narrative around MTD that we’re seeing from many accounting firms and businesses has been overwhelmingly negative. This is most likely because they or their clients are still working “on paper” and simply aren’t ready for the change.

At Hive, we see Making Tax Digital as a positive thing for a number of reasons. One of the most obvious is that our clients and we are already working digital-first, using Xero to assist with getting their records online. This means that embarking on MTD won’t cause the hard slog that others will have to endure. Our clients are able to reap the benefits, with none of the stress that comes with preparing for it.

For new clients, we take care of transferring historical data, reviewing their books, and offering training in Xero to get them to a stage of ease with the system and this new way of working. During this transition period, we’re also able to pick up and solve any issues, such as a missed bank feed slip that might cause a gap in your data. We’ll set up bank rules within the software, meaning that you’re able to work efficiently, and will monitor your Xero and bookkeeping every three months, ensuring that all bank feeds are still accurate and the information posted is correctly categorised.

This is all part of our service; though Making Tax Digital is becoming more pressing, we’re progressing the changes for our clients, not HMRC. Like us, our clients are business owners, and as business owners, it’s imperative to have the information you need to run your business effectively.

This leads nicely into another key positive of working digitally: gaining access to accurate and up-to-date numbers. Simply knowing what’s going on, in real time, can be a hugely powerful thing for your practice. Having access to your data allows you to budget effectively, to plan, and to understand the financial impact of a change in strategy within minutes or hours, not days and weeks. It also allows us to identify any potentially valuable opportunities for you to save tax.

Having readily available financial information is also massively helpful if you’re thinking of buying or selling a practice. It can make or break you five, possibly six, digits. You’ll need up-to-date numbers for valuations, and if you apply for finance such as loans and mortgages. If you’ve got this at your fingertips, you’re in prime position to take advantage of fast-moving changes in the market; something that won’t be possible if your numbers are already nine months out of date.

If you’re an existing Hive client, you’re probably well on your way to becoming Making Tax Digital-ready, while reaping the rewards of this. If you’re not a client yet, and you’re worrying about not being ready, do get in touch. We’ll help you to bridge that gap, but the sooner you get started on your journey, the better it’ll be.