Making Tax Digital - for VAT
16 May 2021
Records you must keep digitally
VAT registered businesses with a taxable turnover of more than £85,000 must follow the rules as set out by HMRC for "Making Tax Digital for VAT" by keeping some records digitally, unless of course;
- your business applied for an exemption
- your business uses the VAT GIANT service
If your business turns over less than £85,000 you can choose to sign up to Making Tax Digital
The records that you must keep digitally are;
- your business name, address and VAT registration number
- any VAT accounting scheme you use
- the VAT on goods and services you supply for example everything you sell, lease, transfer or hire out (supplies made)
- the VAT on goods and services you receive, for example everything you buy, lease, rent or hire (supplies received)
- any adjustments that you make to a VAT return
- the "time of supply" and "value of supply" (value excluding VAT) for everything you buy and sell
- the rate of VAT charged on goods and services you supply
- reverse charge transactions - where you record the VAT on both he sale price and the purchase price of good and services you buy
- your total DAILY gross takings if you use a retail scheme
- items you can reclaim VAT on if you use the Flat Rate Scheme
- your total sals, and the VAT on those sales, if you trade in gold and use the Gold Accounting Scheme
You also need to keep digital copies of documents that cover multiple transactions made on behalf of your business by:
- volunteers for charity fundraising
- third party business
- employees for expenses in petty cash
YOU MUST
add all of your transactions to your digital records however you DO NOT
at this point in time need to scan paper records like invoices or receipts
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If you're a sole trader or landlord earning over £50,000 a year, big changes are coming your way. From April 2026, you'll need to comply with Making Tax Digital for Income Tax (MTD for ITSA) and while that might sound like it's a long way off, it’s closer than it seems. At Books and Business, we work closely with those in the trades and construction sector, and we know that admin is rarely top of the to-do list when you're running jobs, managing quotes, and keeping customers happy. But this change will affect how you keep records and report your income, so starting early is key. Lets get into what MTD for ITSA means for your business and more importantly how we can support you every step of the way.
Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) is coming, now is the time to get prepared! Whether you're a sole trader, subcontractor, or running a small limited company, choosing the right accounting software will keep you compliant and help you stay in control of your finances. But with so many options out there, how do you choose the best MTD software for your business? Here are some key features to look for: HMRC Compatibility The most important feature is that the software you choose is MTD compliant. It should link directly with HMRC so you can send updates digitally as well as meet other MTD obligations. Ease of Use Your time is best spent on-site, not buried in admin. Choose software that’s straightforward and suits your level of accounting knowledge. Look for mobile apps and dashboards that give you access on the go. Automation & Reporting The best systems will save you time by automating recurring tasks, like invoicing, expense tracking, and mileage logs as well as offering clear reports to help you understand where your money's going. Pricing & Scalability Think about where your business is headed. Can the software grow with you? Choose a platform that fits your budget now, but also supports features like payroll, CIS returns, or multiple users down the line. What are the most popular software options: QuickBooks – A popular option for trades and small business owners, offering strong mobile tools and CIS features. Xero – Great for real-time visibility, simple bank feeds, and job costing add-ons. FreeAgent – Perfect for sole traders and subcontractors, especially those who like things kept simple. Sage – Well-established and ideal if you’re looking for a more traditional setup with solid support. You’ve chosen the software but why make the switch now If you’re still using spreadsheets or a paper-based system, we cannot stress enough that now is the time to go digital . Getting ahead of the MTD deadlines gives you time to learn the software, avoid penalties, and work out any teething problems before submissions are mandatory. A quick note to be aware ...... some banks now include accounting software when you open a new business account. However, it’s advisable to do your research first to ensure the software they are offering meets your business needs. We can help with your MTD journey; we offer a variety of packages to suit each individual’s needs, from basic set up to regular training or just ad hoc training on any areas you may be getting stuck with, we also offer full packages where we can do it all for you. Get in touch for more information.
