Only VAT-registered businesses with annual turnover of more than £85,000 are required to maintain digital records and submit VAT returns via Making Tax Digital-compatible software.
This has been a considerable effort to date, with over 1.4 million businesses signed up, submitting more than six million VAT returns digitally.
Legislation in the Finance Bill 2020-21 has been laid out to extend Making Tax Digital (MTD) over the next few years.
From the 2022-23 financial year, starting in April, all VAT-registered businesses – even those with turnover below the £85,000 VAT threshold – are required to maintain digital tax records via MTD-compatible software.
All self-employed professionals that declare annual income over £10,000 via self-assessment tax returns will then be entered into MTD from April 2024 for the 2024-25 financial year.
Jesse Norman, Financial Secretary to the Treasury, said: “This timetable allows businesses, landlords and agents time to plan, and gives software providers enough notice to bring new Making Tax Digital products to market, including free software for businesses with the simplest tax affairs.
“HMRC will expand its pilot service from April 2021 to allow businesses and landlords to test the full end-to-end service before the requirement to join.”
Andy Chamberlain, Director of Policy at the Association of Independent Professionals and the Self-Employed (IPSE), says that while it is “right” that the Government has “given advance warning to allow businesses to prepare for the changes to MTD” the onus is on HMRC not to “make tax even more complex for freelancers”.
If you are a voluntarily VAT-registered business or a self-employed professional, we can work with you to prepare for Making Tax Digital in plenty of time.
At TaxAssist Accountants we can provide guidance and support on selecting the right Making Tax Digital-compliant reporting software, with platforms such as QuickBooks and Xero helping to manage your tax easier and faster, wherever you are.
If you would like a free initial consultation on your future Making Tax Digital obligations as a self-employed professional, please don’t hesitate to contact our friendly and experienced team today on 01522 699870. Alternatively, you can start the conversation with us via our online enquiry form.
Date published 24 Jul 2020 | Last updated 19 Jul 2022