Making Tax Digital (MTD) became mandatory in 2019 for many businesses and additional requirements were implemented in April 2021. As further rollouts are scheduled, we recommend you understand how MTD will impact your businesses as soon as possible. These future rollouts including Making Tax Digital for Income Tax and Making Tax Digital for Corporation Tax.
Our MTD accountants at Alexander & Co are able to help you make the transition.
What is Making Tax Digital?
MTD is an initiative set up by the government, to improve the way businesses and individuals declare their tax. It encourages the use of digital account keeping, in order to bring tax into the 21st century.
This new, fully digital tax system aims to help people get their tax right first time. It is also intended to make it easier than ever to submit your tax returns.
The scheme aims to not only help you save money on your taxes, but also prevent late payment fines. The late payment penalties alone can be detrimental to your business. Therefore, ensuring you are meeting the tax return deadlines is extremely important.
Making Tax Digital for VAT
VAT registered businesses with a taxable turnover over the VAT threshold (currently £85,000) are required to follow MTD rules. This includes keeping digital records and also utilising MTD compliant software to submit VAT returns.
Businesses who are below the VAT threshold can also voluntarily join the MTD scheme now.
What changed in 2021 for MTD?
In April 2020, businesses who were required to use MTD for VAT were expected to put digital links in place. Due to the impact of Covid019, HMRC delayed this until April 2021.
Since 2021, businesses have been required to have digital links in place between all parts of their functional compatible software.
What is next for Making Tax Digital?
The next major update for MTD is Making Tax Digital for Income Tax (MTD IT). This takes affect from April 2026. do bear in mind there are actions needed before this date to become compliant.
Following this, MTD will see the rollout of MTD MTD for Corporation tax. This is not currently scheduled to be mandated until at least 2026.
MTD for Income Tax
MTD for Income Tax will apply to self-employed/sole traders and landlords with total gross annual business and/or property income that is above £50,000. This is scheduled to be introduced in April 2026. It will then apply to other taxpayers with such income above £30,000, subsequently reducing to above £20,000.
If a landlord is also self-employed with other businesses, all the income is combined. This will then determine whether they are mandated for MTD for Income Tax.
For a more comprehensive guide to Making Tax Digital for Income tax, please visit our dedicated page here
Making Tax Digital for Corporation Tax
The Government published a long-awaited consultation on MTD for Corporation Tax in November 2020. This concluded in March 2021.
HMRC have stated that MTD for Corporation Tax will now not be mandated before April 2026.
Understanding MTD with Alexander & Co
Our accountants are on hand to assist clients with any questions they might have regarding current and future rollouts. the following section may also be useful:
What can our Making Tax Digital accountants do for you?
Our team of accountants are experienced with the new MTD scheme and can help you prepare.
If you are not confident with digital software, we can help you submit your tax returns online. Many digital accounting software will have a MTD feature built-in. This allows you to simply click a button and submit your information straight to HMRC.
If you are looking to make the switch to digital accounting and are looking MTD compliant software, we can assist. We are experienced in working with a wide range of software packages including Sage Business Cloud and Xero.
Should you require MTD advice, or have any queries about how it affects your business, please contact our Making Tax Digital team.
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