What is Making Tax Digital?
Making Tax Digital (MTD) is intended to bring the UK tax system into the 21st century by providing businesses with a modern, streamlined system to keep their tax records and provide information to HM Revenue and Customs (HMRC).
The first to be affected were small businesses and individuals with a turnover above the VAT threshold of £85,000. These businesses have been required to keep digital records for VAT purposes since April 2019.
Why did HMRC introduce Making Tax Digital?
HMRC gave the following reasons for launching Making Tax Digital:
- Accurate Tax Information
Replacing paper-based bookkeeping with digital tax accounts will let you check the information HMRC holds about you is 100% correct.
- Reduced Errors
Making Tax Digital’s new reporting function will allow HMRC will to look at your tax information almost immediately, reducing human error from data input.
- Easier to understand
HMRC anticipates taxpayers will better understand how much tax is owed within the digital tax account – much like online banking.
- Easier contact with HMRC
Making Tax Digital will make it easier for you to contact HMRC online via webchats and secure messages.
When will Making Tax Digital affect me?
April 2019 – VAT registered businesses with a turnover above the VAT threshold (currently £85,000) were required to register for Making Tax Digital for VAT. The new rules required these businesses to keep digital VAT records, and submit their VAT returns via MTD-compliant software.
April 2022 – VAT-registered businesses with a taxable turnover below £85,000 will be required to follow MTD for VAT rules for their first return starting on or after April 2022.
April 2026 – Self-employed businesses and landlords with annual business or property income above £50,000 will need to follow the rules for Making Tax Digital for Income Tax from 6th April 2026.
April 2026 – Making Tax Digital for Corporation Tax will not be introduced before April 2026.
April 2027 – Self-employed businesses and landlords with annual business or property income above £30,000 will need to follow the rules for Making Tax Digital for Income Tax from 6th April 2027.
Please be aware of the above dates – to keep up to date with the latest news about Making Tax Digital, please click here to receive our newsletter.
Help with Making Tax Digital
We can work with you to prepare for Making Tax Digital*. As small business owners ourselves, we fully understand what is required to manage your business records digitally. At TaxAssist Accountants, we've spent a great deal of time training and developing the right support services to help small businesses through this period of change.
HMRC will not be offering software to help you report quarterly, so we will advise you about MTD-compliant software such as QuickBooks and Xero to help make managing your accounting records easy, wherever you are.
*If you’re affected by Making Tax Digital (MTD) for VAT, you are not required to register for MTD until you have filed your final, non-MTD VAT return. However, businesses can register earlier if they wish to do so. If you pay your VAT liability to HMRC via direct debit, the banking regulations may also impact your window for registration.
NB: The information provided above is based on current guidance from HMRC and may be subject to change. Please consult our team at TaxAssist Accountants before taking any action.
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