Making Tax Digital (MTD) represents a progressive step toward modernizing the UK tax system. Its primary objective is to equip businesses with an efficient, contemporary system for maintaining their tax records and furnishing information to HM Revenue and Customs (HMRC).
The initial impact of MTD was on small businesses and individuals with turnovers surpassing the VAT threshold of £85,000. These entities have been mandated to maintain digital records for VAT purposes since April 2019.
HMRC cited several compelling reasons for the launch of Making Tax Digital:
Accurate Tax Information : By replacing traditional paper-based bookkeeping with digital tax accounts, MTD ensures the accuracy of information HMRC holds about taxpayers.
Reduced Errors : MTD’s innovative reporting feature enables HMRC to promptly review tax information, mitigating the risk of human errors during data input.
Enhanced Clarity : The digital tax account provides taxpayers with a clearer understanding of their tax liabilities, similar to online banking.
Simplified Communication : Making Tax Digital facilitates streamlined online communication with HMRC, including webchats and secure messages.
Key implementation dates for Making Tax Digital are as follows:
April 2019 : VAT-registered businesses with turnovers exceeding the VAT threshold (£85,000) were obligated to register for Making Tax Digital for VAT. These businesses were required to maintain digital VAT records and submit VAT returns using MTD-compliant software.
April 2022 : VAT-registered businesses with a taxable turnover below £85,000 will be required to adhere to MTD for VAT rules for their initial return starting on or after April 2022.
April 2026 : Self-employed businesses and landlords with annual business or property income surpassing £50,000 will need to adhere to Making Tax Digital for Income Tax rules, commencing from April 6th, 2026.
April 2026 (Projected) : Making Tax Digital for Corporation Tax is anticipated to be introduced no earlier than April 2026.
April 2027 : Self-employed businesses and landlords with annual business or property income exceeding £30,000 must follow the rules for Making Tax Digital for Income Tax from April 6th, 2027.
Stay informed about these dates and reach out to us for the latest updates on Making Tax Digital.
We can collaborate with you to prepare for Making Tax Digital*. As fellow small business owners, we comprehend the necessities for managing your business records digitally. At Belmont Accounting Services, we’ve dedicated considerable effort to training and developing the right support services to guide small businesses through this transformative period.
Since HMRC does not provide software for quarterly reporting, we can provide advice on MTD-compliant software options such as QuickBooks and Xero, making accounting record management accessible from anywhere.
If you require guidance during these changes, don’t hesitate to contact us today to schedule a free initial consultation.
*Note: Businesses affected by Making Tax Digital (MTD) for VAT are not obligated to register for MTD until they have filed their final non-MTD VAT return. However, businesses can opt to register earlier if they prefer. If you pay your VAT liability to HMRC via direct debit, banking regulations may also influence your registration timeline.
NB: The information presented here is based on current HMRC guidance and may be subject to modifications. Please consult our team at Belmont Accounting Services before taking any action.