What Is Making Tax Digital?
Making Tax Digital (MTD) is a government initiative that sets out a bold vision for a digital tax system to "make it easier for individuals and businesses to get tax right and keep on top of their affairs". The aim of the initiative is to make tax administration more effective, more efficient and easier for taxpayers, through the implementation of a fully digital tax system. The changes outlined in the Making Tax Digital initiative will apply to a wide range of taxpayers, including most businesses, self-employed people and landlords, as well as individual taxpayers.
Are You Still Filing On The HMRC website?
From 1 Nov MTD will be the way* to file your VAT. With the portal closed, VAT submissions can no longer be done on the HMRC website. Don’t stress, you’ve come to the right place. QuickBooks’ HMRC-recognised accounting software is the solution.
*Exclusions apply, please visit gov.uk for more information.
How Do Businesses Comply?
To comply with Making Tax Digital for VAT, businesses have to keep digital records. This must be done using what HMRC calls 'compatible software’. In other words, it must be able to connect directly to HMRC and send your details to them using digital links.
How will Making Tax Digital impact me?
MTD was introduced for nearly all VAT-registered businesses with a taxable turnover above £85,000 in April 2019. They have to use Making Tax Digital software to keep digital records and make VAT submissions to HMRC.
From April 2022, this will be extended to all VAT-registered businesses in the UK.
When Will The Next Changes Happen?
Making Tax Digital has a phased rollout plan which started in early 2016. Its key milestones include:
All VAT-registered businesses must follow Making Tax Digital rules.
Making Tax Digital for Income Tax for self-employed business owners and landlords.
Making Tax Digital for Income Tax for partnerships with individual partners.
HMRC will aim to introduce Making Tax Digital for Corporation Tax.
All VAT-registered businesses must
follow Making Tax Digital rules.
Making Tax Digital for Income Tax for
self-employed business owners and landlords.
Making Tax Digital for Income Tax
for partnerships with individual partners.
HMRC will aim to introduce
Making Tax Digital for Corporation Tax.
- April 2017 – Private pilot rollout starts.
- July-December 2017 – Digital tax accounts show taxpayers an overview of their liabilities in one place and HMRC begins a private pilot of Making Tax Digital for VAT.
- Spring 2018 – Live pilot of Making Tax Digital for VAT begins.
- April 2019 – Businesses with VATable sales above the VAT threshold are required to keep digital records and submit quarterly returns for VAT purposes only through their accounting software.
- April 2021 – HMRC no longer accepts VAT submissions made using the XML facility. This means that MTD VAT returns must be submitted via HMRC’s MTD connection.
- April 2022 – All VAT-registered businesses are required to use MTD-compatible software to store business records digitally and send VAT returns to HMRC.
- April 2024 – Making Tax Digital for Income Tax will be introduced, requiring self-employed businesses and landlords with annual business or property income above £10,000 to follow the rules for MTD for Income Tax from 6th April 2024.
- April 2025 – Partnerships with individuals as partners will have to follow the rules for MTD for Income Tax from April 2025. Limited liability partnerships (LLPs) and partnerships with corporate partners will be required to join at a future date yet to be announced.
- 2026 onwards – MTD for Corporation Tax is expected to be the next phase in the initiative. However, HMRC has advised that MTD for Corporation Tax rules won’t come into effect until at least 2026.
Most frequent questions and answers
Making Tax Digital for VAT is currently compulsory for all VAT-registered businesses with a taxable turnover of over £85,000. From April 2022 this is going to be extended to all VAT-registered businesses.
Making Tax Digital for VAT is already in effect for VAT-registered businesses with a taxable turnover of over £85,000. Key dates to be ready for: April 2022 – Making Tax Digital for VAT; April 2024 – Making Tax Digital for Income Tax; April 2026 – Making Tax Digital for Corporation Tax.
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