What is Making Tax Digital?

Making Tax Digital or MTD for short is part of HMRC’s mission to become one of the world’s most digitally advanced tax systems. It required businesses in the UK to keep digital records with the help of ‘functionally compatible software’ that can connect directly with HRMC – Guess what we have just that, and we’ll tell you about it later on.

Therefore, MTD is making fundamental changes to how the tax system works by making the tax administration more effective, more efficient, and easier for you to keep on top of your affairs, especially with the help of your friendly accountants.

Rolling out MTD

Digital records and real-time access to accounts and figures whenever and wherever you want which is a total no-brainer to us!

In fact, according to the HRMC Budget 2020 report by 9 March, 2020 more than 1.4 million businesses had joined the new service. Additionally, more than 4 million VAT returns had been submitted successfully using MTD-compatible software.

Since April 2019, VAT-registered businesses with a taxable turnover of £85,000 or more have been obliged to keep digital records and submit VAT returns using MTD-compatible software.

From April 2022, that requirement is due to extend to all VAT-registered businesses, regardless of turnover.

So if your taxable turnover is below £85,000, you will be required to follow the Making Tax digital rules for your first return starting on or after April 2022.

MTD for Income Tax

Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow MTD rules for Income Tax from their next accounting period starting on or after 6 April 2024.

Some businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot, to test and develop the Making Tax Digital service for Income Tax. If you are a self-employed business or landlord, you can voluntarily use software to keep business records digitally and send Income Tax updates to HMRC instead of filing a Self-Assessment tax return.

From April 2025, MTD will apply to Partnerships.

MTD 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 allow businesses to take part in a pilot for Making Tax Digital for Corporation Tax and not mandate its usage before 2026.

MTD – Compliant software

We’re Platinum partners with the leading cloud-based accounting software provider, Xero. This means we’re already MTD compliant and can help you make the transition as smooth as possible and provide you with expert help and advice along the way.

Our team will support you in choosing the software that will make a real difference to the way you run your business. Get in touch