What is Making Tax Digital?

What is Making Tax Digital?

Making Tax Digital (MTD) is a new scheme that has been set up by HMRC as a way to modernise the tax system in the UK, replacing paper records with a digitalised system. Once the MTD system is in place, business owners must keep digital records and make submissions to HMRC using approved software.

When is Making Tax Digital happening?

The first phase of the MTD scheme came into effect in April 2019, when VAT payments became digital. However, the next phase of MTD is being introduced in April 2023, Making Tax Digital for Income Tax Self Assessment (MTD ITSA).

 

This new phase, the introduction of MTD ITSA, is the most significant change to HMRC’s taxation of individuals since the introduction of the self-assessment system in 1996. As in 1996, there will be a change in the way we deal with our personal tax affairs.

 

According to HMRC estimates, there are 4 million businesses that pay income tax, but who are not VAT registered. By the time April 2023 rolls round, all of these businesses will need to be keeping digital business records to comply with the new rules.

What do you need to do to prepare?

You can register for your own digital tax account now, which we strongly recommend. It will allow you to get to grips with the new processes before it becomes the only format that HMRC will accept.

 

We will need you to provide us with your paperwork on a regular basis (at least quarterly) so that we can ensure that your accounts are up to date.

 

Download our app

We want to help people during the transitional Making Tax Digital process. We have designed this app to help you get a head start in digitalising your financial records. Scan and store documents, track your mileage, calculate tax and set up your very own personalised reminders all in one place.

Download the app here.

 

If you have questions about how your business can prepare for Making Tax Digital get in touch and we can guide you through the process.