Making Tax Digital (MTD) is part of the government’s plans to make it easier for individuals and businesses to get their taxes right and keep on top of their affairs. The intention is to transform tax administration, make it more effective and efficient, improve tax compliance, and provide more precise data to HMRC. Well, that’s the plan anyway.

MTD is still very much a work in progress. However, it is already here for some businesses and coming thick and fast for others. So, we’ve made this page to help keep you (and us) ahead of the curve!

Table of Contents

MAKING TAX DIGITAL FOR VAT

VAT registered businesses with a taxable turnover above the VAT threshold (£85,000) have been following the MTD rules since 2019. Therefore, businesses in this category should already keep digital records and use software to submit their VAT returns.

VAT registered businesses with a taxable turnover below £85,000 will be required to follow MTD rules for their first return starting on or after April 2022.

MAKING TAX DIGITAL FOR INCOME TAX

Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for Income Tax from 6th April 2024.

The new system means six reports (yes 6!) will be mandatory via MTD enabled software to include –

  • 4 Periodic Reports – within one month of the quarter end (submission deadlines are 5th August, 5th November, 5th February, 5th June)
  • 1 End of Period Statement – By 31st January after the tax year-end – to include all accounting adjustments. (For property – per property business, not per property)
  • 1 Finalisation Statement – Replaces the Self-Assessment Tax Return by 31st January after the tax year-end – Summary of all reportable income

MTD for Income Tax will affect over 4 million individuals whose income exceeds £10,000, including –

  •       Sole Traders
  •       UK Lettings
  •       UK & EEA Furnished Holiday Lettings
  •       Overseas Property

The new rules mean many businesses will be required to enter their income and expenditure onto MTD compliant software or a spreadsheet, which will then link to HMRC via bridging software.

MAKING TAX DIGITAL FOR CORPORATION TAX

The government will provide businesses with an opportunity to take part in a pilot for Making Tax Digital for Corporation Tax and will not mandate its usage before 2026.

WHAT NOW?!

We understand this is a lot to take in, and there are still many unanswered questions. We will be using this page to provide updates as they come. But, for now, we will be doing lots of work in the background to make sure our clients have all the necessary information as and when they need it.  

If you would like to know more information regarding MTD or would like to know what you can do now to get prepared, contact us.