Making Tax Digital

Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs – meaning the end of the annual tax return for millions.

At the moment, Making Tax Digital is all about VAT submissions. But over the coming months and years it will include Income Tax and Corporation Tax too.

Making Tax Digital for VAT

MTD was introduced for nearly all VAT-registered businesses with a taxable turnover above £85,000 in April 2019.

In April 2022 this was extended to all VAT-registered businesses in the UK.

All VAT-registered businesses are required to follow the Making Tax Digital rules by keeping digital records and using software to submit their VAT returns.

Making Tax Digital for Income Tax

For those eligible, MTD for Income Tax for Self-Assessment (ITSA) will replace the current requirement to file an annual Self-Assessment tax return. Instead, you’ll use software to keep digital records and file updates at least every quarter via MTD compatible software to HMRC.

MTD for Income Tax is set to roll out from April 2024, and will cover all unincorporated business and landlords for Self Assessment with annual business and/or rental income over £10,000.

If your income is £10,000 or below, you can continue using the existing Self-Assessment system.

The government aims to increase the accuracy of the returns with this new system, making it easier to get taxes right and saving time and money - for both HMRC and the individuals and businesses affected.

Under MTD, you’ll be required to:

  • Keep digital records and use compatible software to submit quarterly information to HMRC, or use bridging software to connect spreadsheets.
  • Report your financial data to HMRC at least every quarter.
  • Finalise your taxes at the end of your accounting period and submit a final declaration

Making Tax Digital for Corporation Tax

The government has published a consultation on the future design of Making Tax Digital for Corporation Tax and welcomes views from companies and other organisations within the charge to Corporation Tax, agents, professional bodies and software developers.

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.

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