Making Tax Digital

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.

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.

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.

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. 

The next update to MTD is scheduled for April 2022. This will apply to VAT registered businesses that have a taxable turnover below £85k. They will also need to follow Making Tax Digital rules for VAT. This will apply to their first VAT return that falls on or after April 2022.

Following this, MTD will see the rollout of MTD for Income Tax (scheduled for 2022) and MTD for Corporation tax. This is not currently scheduled to be mandated until at least 2026

MTD for Income Tax will apply to self-employed businesses and landlords with annual business or property income that is above £10,000. This is scheduled to be introduced in April 2023, but has now been delayed.

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.

The Government published a long-awaited consultation on MTD for Corporation Tax in November 2020. This concluded in March 2021.

HMRC has confirmed that it intends to commence a voluntary pilot in April 2024 for MTD for Corporation Tax. The mandate is expected to follow from 2026. HMRC has stated that it will not Mandate MTD for Corporation Tax ahead of this date.

Our accountants are on hand to assist clients with any questions they might have about future rollouts. Below are some useful MTD articles written by our tax team:

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.