Making Tax Digital: what is it?
Making Tax Digital (MTD) is a government initiative to digitise the way businesses manage tax. It’s intended to:
- make filing tax easier for businesses
- minimise the time taken to enter returns manually
- give businesses better financial control overall
MTD for VAT
From April 2022, all VAT-registered businesses who do not have an exemption must use HMRC-recognised MTD software to:
- keep and maintain digital accounting records
- submit VAT returns online
As per previous requirements, most VAT registered businesses will have to make submissions and payments quarterly, and the dates of these deadlines have not changed.
MTD for Income Tax Self Assessment (ITSA)
MTD for Income Tax Self Assessment (ITSA) will be introduced from April 2024 for unincorporated businesses and landlords with incomes above £10,000 per year.
Key points to bear in mind:
- Unlike the existing ITSA scheme, which only requires one filing per year (October 31 for paper returns and 31 January if filing online), MTD for ITSA will require you to provide HMRC with quarterly updates and complete a process to finalise your overall tax position at the end of the year.
- You’ll need to keep digital records of all your business income and expenses.
- The deadlines for finalising tax affairs and making payments are not changing.
MTD for Corporation Tax
HMRC has also confirmed that MTD for corporation tax will also be introduced. The exact timing has not been announced, but HMRC have said it will not be mandated until April 2026 at the earliest.