Latest update – January 2023
The Treasury has announced that Making Tax Digital (MTD) for income tax self-assessment (ITSA) has been delayed until April 2026.
Changes are afoot at HM Revenue & Customs.
You may have been aware that in the March 2015 budget George Osborne announced that he was bringing HMRC into the 21st Century and abolishing the Annual Tax Return. Well George Osborne has left, but his plans are still in place.
The Making Tax Digital initiative continues to push ahead in the background, albeit at a slower pace than originally planned.
- The method of updating HMRC with your income and expenses information, and the regularity of this update
- An online digital account which will allow you to see your total tax position at any point in time, across all taxes
- The inclusion of a voluntary pay as you go for taxes
- The ability to offset tax overpayments against tax charges across all taxes (not just income tax)
- Reformation of the penalty system
Making Tax Digital for VAT
If you have a VAT registered business, you are now required to keep digital records and file your tax returns using compatible software.
HMRC will sign up all remaining businesses to Making Tax Digital for VAT automatically unless they are exempt or have applied for exemption.
You should now find software that works with Making Tax Digital for VAT.
If you’re an agent, you should follow the Making Tax Digital for VAT step by step guide for agents.
Making Tax Digital is the government initiative transforming the way we report tax to HMRC.
This will apply to businesses with a turnover above the VAT threshold. From April 2022, it was mandatory for any business that was VAT registered (either compulsory or voluntary) to be MTD compliant.
The Government’s current plan is that businesses will start using the Making Tax Digital system from April 2019 and only to meet their VAT obligations.
This will apply to businesses with a turnover above the VAT threshold, but other businesses can use the system voluntarily if they wish.
Other taxes will not fall within the scope of Making Tax Digital before April 2020, at the earliest.
You will be required to submit your income and expenses on a quarterly basis. This will need to be done using third party bookkeeping software. This essentially means that reporting on Excel spreadsheets will not be accepted.
No. HMRC have advised that there will not be a need to complete 4 tax returns each year. The best way to view the returns, is as a Quarterly Information Update. The details regarding exactly what this process will be are yet to be agreed and disseminated into the public domain.
You can register for your own digital tax account NOW. This will mean that you will be set up for when the quarterly reporting applies to you.
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.
No. At the moment, we have been told that you will still only have to pay tax once a year, and the deadlines will remain the same for tax payments. However, by making 4 returns a year, you will be able to see throughout the year how much tax you are likely to have to pay. This will mean that you shouldn’t get a surprise at the end of the year.
HMRC have amended the original guidelines about who will need to report their income under MTD rules. If you are self employed or a landlord with income more than £50,000 you will need to enrol in to MTD for Income Tax from 6th April 2026, and if your income is more than £30,000 you will need to enrol in to MTD for Income Tax from 6th April 2027. Currently there are no plans for businesses or landlords with income less than £30,000 to comply with MTD rules.
The full details and consultation papers for HMRC Making Tax Digital is available HERE
If you’re looking for an accountant that can help you with Making Tax Digital at your company, get in touch today
The full details and consultation papers for HMRC Making Tax Digital is available HERE
If you’re looking for an accountant that can help you with Making Tax Digital at your company, get in touch today