Making Tax Digital

HMRC’s Making Tax Digital (MTD) plans will ultimately create challenges for businesses, individuals and landlords alike, and our specialist tax and accounting experts are ready to assist.

MTD is changing the way in which all individuals and businesses report their financial details to the HMRC.

HMRC is aiming to become one of the most digitally advanced tax administrations in the world and MTD is fundamental to realising that ambition.

The introduction of MTD is to transform tax administration to be more efficient, effective, and easier for taxpayers to get their tax right. Ultimately HMRC want to streamline filings and remove the manual re-keying of data to mitigate the risk of errors.

The first phase of the MTD journey was introduced in April 2019 with MTD for VAT. This required VAT registered businesses with a taxable turnover above the VAT threshold (£85,000) to keep digital records and use software to submit their VAT returns.

Further phases are now being introduced,

Making Tax Digital roadmap

1st April 2021 – Phase 2 of MTD for VAT

This impacts VAT registered business who are already required to comply with MTD for VAT and sees the end of the soft-landing period. This phase dictates that there now must be digital links between all aspects of the accounting function. This means no manual keying in of data unless it is the first point of entry to the accounting system. There needs to be a clear digital link of the data from the source document all the way through to VAT submission. Read more on our article here.

1st April 2022 – Phase 3 of MTD for VAT

All VAT registered businesses will need to follow MTD rules for VAT return periods starting on or after 1st April 2022.

6th April 2023 – Phase 1 of MTD 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 their next accounting period starting on or after 6 April 2023.

All individuals can now access their Personal Tax Account (PTA) online at https://www.gov.uk/personal-tax-account. The account gives individuals an up to date picture of their tax position in much the same way as online banking does for personal finances.

2026

It is expected that MTD for Corporation Tax will be introduced in 2026.

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