HMRC has recently announced more about its plans for Making Tax Digital (MTD). Many people still seem unaware of what is coming and how it will affect them.

As things currently stand, everyone who runs a business and every landlord with sales or rent in excess of £10,000 will have to keep their records using approved smartphone apps and accounting software.

It won’t be optional, it will be the law.

And it is all set to start in just over a year.

The government believes that a significant amount of tax is lost each year because of poor record keeping.

The argument goes that if businesses and landlords keep digital records as close as possible to real time those records will be more accurate and the government will collect more tax.

The technology will identify and correct unintentional errors and will prompt the user to consider things that are known to cause mistakes.

If you already use accounting software to keep your records then the likelihood is that you will not find this an extra burden.

If however you keep handwritten records or use spreadsheets then you will need to fundamentally change what you do.

HMRC has responded to calls for spreadsheets to be classed as digital records for MTD but it will still require the spreadsheet to link to MTD compliant software.

It has also said that those submitting three-line accounts will be able to continue to do so, but once again there will be a requirement to use MTD compliant software.

There will be free software for those with the most straightforward affairs, but “straightforward” has not been defined. Many will therefore face extra costs.

Ministers have been asked to consider exempting more businesses from this new regime.

The £10,000 exemption currently proposed is far too low and the House of Commons Treasury Committee has suggested exempting those below the VAT threshold.

That is an eminently sensible suggestion.

If the limit remains at £10,000 millions of businesses and landlords will have to change what they do.

If you have an accountant, you should ask for advice on what to do.

My firm has been advising clients on using accounting software for decades so we are well prepared to advise on solutions for MTD. With a launch date only a year away, time is of the essence.

  • Paul Aplin OBE is a tax partner with A C Mole & Sons and Vice President of the Institute of Chartered Accountants in England & Wales; you can follow him on Twitter @PaulAplinOnTax.

He and fellow tax partner Amanda Gunter can be contacted on 01823 624450