No matter the size of your business it’s important to keep up to date with HMRC’s Making Tax Digital (MTD) initiative. However, not everyone may be aware exactly what it is or how it affects them.
So, what is MTD and what are the key aims?
In simple terms the aim of MTD is to modernise the UK tax system and bring it fully into the digital age. MTD requires that all business, and some individuals, will need to keep digital records and file all returns using compatible software.
HMRC is looking to improve accuracy by pushing businesses, and some individuals, to use digital software for bookkeeping rather than using a paper-based system. It will also help increase efficiency and reduce processing time by making all submissions digital, making it easier for HMRC to process the returns, and requiring quarterly returns to make it easier for HMRC to monitor tax compliance and potential identity fraud.
What parts of MTD are currently mandatory and what is coming up?
There have been multiple setbacks and delays in getting the MTD system up and running, with only some elements of the system being in use now.
At present MTD for VAT is the only element of the system that is mandatory and has been since April 2019. This requires all VAT registered businesses to keep digital records and to submit quarterly VAT returns through compatible software.
The next elements to come into force for MTD filings are for Income Tax Self-Assessment and Corporation tax, which are currently going to be coming into force from April 2026. These will require sole traders and landlords with income over £30,000 per year to keep digital records and submit quarterly updates to HMRC. Whereas how HMRC will deal with the Corporation Tax filings is still being finalised, with only a provisional date of April 2026.
Getting ready for MTD Compliance
If you’re not registered for MTD, looking to get yourself ready for when it comes in, want some guidance on digital software or just general advice please get in touch with us.
