Making Tax Digital (MTD)

What is HMRC Making Tax Digital?

Register for HMRC Making Tax Digital MTD is part of HM Revenue & Customs (HMRC) wider digital strategy. It will make easier for individuals, businesses and other organisations to ensure their tax affairs are in order. The driving force behind the belief within HMRC. That taxpayer errors result in a significant proportion of the tax gap. The difference between the tax paid and tax due. That poor record keeping is a major contributing factor to these errors.

It will therefore require businesses. Other organisations and individuals to keep their records digitally. Using either bookkeeping or accounting software or at least on spreadsheets. HMRC believe that errors will reduce and with them, the tax gap.

When does it come into effect?

From April 2019 VAT Registered businesses or organisations with a turnover of more than £85,000. It will require to adopt and comply with Making Tax Digital.

Will it affect you or your organisation?

If you currently do a tax return or VAT returns, then the simple answer is yes.

Even if you or your organisation or business do not fall within the criteria for digital record keeping and quarterly submissions in April 2019 or April 2020. Then your interaction with HMRC tax will still become more digital.

Making Tax Digital deadlines

HMRC is introducing Making Tax Digital VAT gradually. Sign up for Making Tax Digital MTD for VAT started from 1 April 2019, affecting VAT registered businesses with a taxable turnover above the VAT threshold of £85,000.

Next all VAT registered businesses will need to comply with Making Tax Digital for VAT from April 2022.

And from April 2023, Self Assessment taxpayers will need to comply with Making Tax Digital for Sole trader Tax.

Here are the Making Tax Digital deadlines:

• April 2019: VAT registered businesses with a taxable turnover above the VAT threshold of £85,000 need to keep digital records. Submit digital VAT returns using compatible software. Some ‘more complex’ businesses were given a six-month deferral (read more below).
• October 2019: more complex businesses who were deferred need to comply with MTD.
• April 2022: Making Tax Digital VAT software will compulsory for businesses with a turnover below the £85,000 VAT threshold.
• April 2024: MTD will apply to taxpayers who file income tax Self Assessments for business or property income of more than £10,000 a year. A self-employed MTD pilot will begin in in April 2022.
• April 2025: MTD for general partnerships has been delayed until April 2025. HMRC will not take pilot plans. MTD for all other Partnership types has been delayed until after April 2025.
• April 2030: The Government will give the opportunity to take part in a pilot for MTD for Corporation Tax. It will not make this mandatory for some time. HMRC said that the expected time to be after April 2026 but before 2030.  

‘More complex’ businesses include trusts, ‘not for profit’ organisations that are not set up as a company, VAT divisions, VAT groups. Those public sector entities required to provide additional information on their VAT return (such as government departments and NHS Trusts), local authorities, public corporations, traders based overseas. Those required to make payments on account and annual accounting scheme users.