Making Tax Digital

Changes Announced and Future Developments to watch out for

Since 2019, the vast majority of VAT registered businesses with a taxable turnover above the £85,000 VAT threshold have been required to keep digital records and submit their VAT Returns using Making Tax Digital (MTD) compatible software.

For many businesses this meant that for the first time, they were required to submit details of their VAT Returns directly to HMRC using their accounting software program, or set of software programs.

MTD for VAT scope extended
HMRC have now announced that MTD for VAT is being extended to cover all UK VAT registered businesses from 1 April 2022.

Many of these smaller businesses, with taxable turnovers of under £85,000, include those who may have voluntarily registered for VAT, to obtain VAT refunds on business expenses or to create the illusion of being larger businesses to existing or prospective customers.

For many of these smaller VAT registered businesses, the requirement to begin keeping digital accounting records, will come as an unpleasant development when 1 April 2022 arrives. It is important to note that this is not an ‘April Fool’ and planning for the changes needs to begin well in advance of the change.

MTD for Income Tax
HMRC have also announced that MTD for Income Tax will apply from 6 April 2023 for unincorporated businesses and landlords with total business or property income above £10,000 per year.

This will require these businesses and landlords to maintain digital accounting records and submit a quarterly summary of their business income and expenses to HMRC using MTD compatible software. This will enable HMRC to send an estimated tax calculation based on the information provided to ‘help businesses and landlords budget for their tax’. At the end of the year, these businesses and landlords can add any non-business tax information and finalise their tax affairs using the MTD compatible software. This is designed to replace the need for a Self-Assessment tax return.

These businesses and landlords will have to use software to capture details of all business income and expenditure for the whole of the accounting period. This will need to include details from invoices and receipts for purchases and expenses and as a minimum should include the date, the amount and the category.

HMRC are inviting those brave enough to join an MTD for Income Tax pilot!

MTD for Corporation Tax
HMRC is consulting on introducing MTD for Corporation Tax to be effective from 1 April 2026 and this will involve incorporated companies and other corporate taxpayers keeping digital records and making digital submissions. As more details become available we plan to provide timely updates.

Contact Us

To find out more about how we can help you plan for these changes or assist with maintaining digital records and making MTD submissions to HMRC, please get in touch either by calling 01925 222 003 or fill in an online enquiry form to request a call back at your convenience.

If you’d like to learn more about our expert advisers, visit our team page.

Remember that MTD is here to stay but with early planning and taking appropriate advice we can help guide you through the changes and challenges ahead.

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