Making Tax Digital – The Next Stage

The Government has announced the next stage of Making Tax Digital (July 21). The tax digitisation programme will impact lots more people including private landlords and businesses with a turnover of more than £10,000.

At present, businesses above the VAT threshold of £85,000 are covered by the system, which requires them to keep digital records and provide VAT returns through software.

  • From April 2022, the programme will be extended to all VAT-registered businesses with turnover below the VAT threshold (£85,000).
  • From April 2023, it will apply to taxpayers who file income tax self-assessment tax returns for business or property income of more than £10,000 a year.

Making Tax Digital for VAT

VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) are now required to follow the Making Tax Digital rules by keeping digital records and using software to submit their VAT returns.

If you are below the VAT threshold you can voluntarily join the Making Tax Digital service now.

VAT-registered businesses with a taxable turnover below £85,000 will be required to follow Making Tax digital rules for their first return starting on or after April 2022.

Making Tax Digital for Income Tax

Self-employed businesses and landlords with business turnover above £10,000 will need to follow the rules for MTD for Income Tax from their next account period starting on or after 6 April 2023.

Some businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot to test and develop the Making Tax Digital service for Income Tax. If you are a self-employed business or landlord you can voluntarily use software to keep business records digitally and send Income Tax updates to HMRC instead of filing a Self Assessment tax return.

Helping businesses, self-employed people and landlords get it right first time

The majority of customers want to get their tax right but the latest tax gap figures show that too many find this hard, with avoidable mistakes costing the Exchequer £8.5 billion in 2018 to 2019. The improved accuracy that digital records provide, along with the help built into many software products and the fact that information is sent directly to HMRC from the digital records, avoiding transposition errors, will reduce the amount of tax lost to these avoidable errors.

HMRC have consulted with stakeholders throughout the development of Making Tax Digital, both formally and informally.

The primary legislation for Making Tax Digital relating to VAT and Income Tax is contained in the Finance (No.2) Act 2017, providing certainty about the broad framework in which Making Tax Digital will operate, with secondary legislation for VAT laid in February 2018, which came into force from April 2019.

VAT Notice has been published, which explains the rules for Making Tax Digital for VAT and about the digital information that must be kept.

HMRC have published a communication pack which supports partnership working arrangements with stakeholders, who can use the contents to inform their own communications activity and key messages for their clients, customers or members.

Help and support

HMRC provides a wide range of digital services and support for businesses and the self-employed.

Are you prepared for Making Tax digital?  Contact a member of the team today on 0161 359 4227