Making Tax Digital Hub

 

 

Message us

Making Tax Digital

Making Tax Digital is the biggest shake-up of the tax system in 20 years and will fundamentally change the way taxpayers report to HM Revenue & Customs (HMRC).

On this page you will find all of our articles relating to Making Tax Digital. We will continue to add further articles and guidance as details emerge from HMRC. 

We are sure that you will find this page a useful point of reference during the coming months.

How will the changes impact you?

You will be required to keep all records in a digital format

U

You must use HMRC approved software

You will be required to submit quarterly returns

Making Tax Digital Timeline

April 2022

VAT registered businesss’s with a taxable turnover below £85,000 will be required to follow Making Tax Digital rules for their first VAT Return, starting on or after April 2022.

"

April 2024

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

"

April 2025

From April 2025 partnerships will be required to follow MTD rules when submitting income tax self-assessment for the accounting period starting April 2025.

"

April 2026

MTD for Corporation Tax expected to begin mandation from April
2026. This is subject to consultation and legislative updates.

Frequency Asked Questions

What is Making Tax Digital (MTD) for Income Tax?

MTD requires individuals to keep accounting records in digital format and to submit tax returns using MTD compliant software.

The idea behind this is to ultimately decrease the chances of any errors that might occur. Studies have shown that the number of errors in 2018 and 2019 amounted to £8.5 billion, which were all avoidable mistakes, if the correct mechanisms were in place.

Do you have to use MTD?

Self-employed businesses and landlords with annual income (not profit) of over £10,000 will be required to follow MTD rules from 6 April 2024. The £10,000 threshold is for total income (not profit) from self employment and property income combined.

Penalties of up to £3,000 may be imposed on individuals and businesses that fail to keep records digitally if they fall within MTD.

Digital start date for MTD for income tax?

Self-employed businesses and landlords that are already trading as at 5 April 2023 will have a digital start of 6 April 2024. Other self-employed individuals and landlords starting after 6 April 2023 will have a different digital start date based on their individual circumstances.

HMRC has advised that taxpayers who fall within MTD, can start signing up for MTD from 6 April 2022 without activating any MTD obligations.

How does MTD work?

MTD for income tax will require the affected individuals to submit quarterly updates of their income and expenditure to HMRC, along with keeping digital records. A year end declaration will also be required to be submitted following the end of the year using MTD compliant software.

What is the year end declaration for MTD income Tax?

In addition to the quarterly updates, HMRC will also require an end of year return. So, all self employed individuals and landlords will submit
annual statements which will include any tax adjustments such as disallowable expenditure, and, claims for allowances and reliefs. The
deadline for this statement will be the same as Self-Assessment, being 31 January following the tax year end.

Can I voluntarily register for MTD now?

HMRC has opened voluntary registration under a pilot scheme from 9 December 2021. On the basis that the participants do not have any other sources of income apart from either self-employment or property income.
Voluntary registration cannot take place if the participants were in receipt of any COVID – 19 grants such as self – employment support scheme (SEISS), coronavirus job retention scheme (CJRS) and eat out to help out scheme.

Case Studies

Registering a company for VAT on new MTD system

We, on behalf of the company, tried to register them for VAT using the new MTD system. Unfortunately, due to a glitch in their system, HMRC was not unable to register the company for VAT using MTD. This led to much stress for our company which needed to charge VAT on its supplies. We contacted HMRC (over a period of 18 months), on at least 40 occasions and were passed from pillar to post, with HMRC unable to resolve our issue. Eventually, we were able to get the company VAT registered (not for MTD) and had to submit manual spreadsheets for their returns. We also complained about the poor service and the company was compensated with thousands of pounds for their trouble. This shows we look after our clients and resolve their issues even when HMRC are being intransigent.

Our Making Tax Digital experts

Stephen Charles

Stephen Charles

Tax Partner

Paul Wormald

Paul Wormald

Partner

Aaron Hemmington

Aaron Hemmington

Tax Partner

Craig Walker

Craig Walker

Tax Director

Contact our experts

1 + 9 =

Making Tax Digital News

Tax Rates and Allowances 2022/23

Introduction We have summarised the key rates and allowances which are fundamental to our business and personal lives. We are sure that you will find them a useful point of reference and have set out below a few examples of how they can be used. Personal tax rates As...

VAT and Making Tax Digital

VAT and Making Tax Digital

On 1 April 2019 (this was not a joke!!) HMRC introduced Making Tax Digital (MTD) for VAT.  Businesses above the current VAT threshold of £85,000 have since needed to submit their VAT returns using “functional compatible software”. As of 1 April 2022, all VAT...