You may have noticed that Making Tax Digitial (MTD) doesn’t seem at the forefront of everyone’s minds as it was last year. This is because the rollout for Income Tax Self-Assessment (ITSA) was pushed back. Originally planned for this year, Making Tax Digital for ITSA won’t be mandatory for certain tax payers until April 2026 at the earliest.
This delay gives self-employed individuals and landlords more time to prepare for the shift to digital tax reporting. But don’t get too comfortable with the traditional system – Making Tax Digital is still on its way!
Here’s a breakdown of the latest on MTD:
What is Making Tax Digital (MTD)?
MTD is a government initiative to help modernise the UK tax system. Under the initiative, businesses and individuals must keep digital records and submit tax returns using MTD-compatible software. This aims to improve accuracy, reduce errors, and streamline tax filing.
What is the current situation?
- MTD for VAT: This is already fully rolled out. Since April 2022, all VAT-registered businesses must follow MTD for VAT rules. You’ll need to use MTD-compatible software for record-keeping and quarterly submissions.
- MTD for ITSA (Income Tax Self-Assessment): The rollout is delayed, with a phased approach planned. Here’s the current timeline:
- April 2026 (earliest): MTD for ITSA becomes mandatory for self-employed individuals and landlords with turnover exceeding £50,000 per year.
- April 2027 (potential): The scheme may be extended to those with a turnover of £30,000 and above.
- The new labour government have pledged to close the tax gap and see the digitisation of taxes as one way to do this. They believe it will free up resources to improve the service provided by HMRC and will improve the record keeping of tax payers.
What can you do to prepare?
Whether you’re affected immediately or not, familiarising yourself with Making Tax Digital and the rules and regulations is brings to your business accounting is a great idea. You can even voluntarily sign up for the scheme if you are ready to.
Get informed: Click here to visit the HMRC’s Making Tax Digital website, for the latest information.
Explore compatible software: Numerous accounting and bookkeeping software options integrate perfectly with MTD. Research and choose a solution that fits your needs as a business.
Start your digital journey: If you haven’t already, consider transitioning your record-keeping to a digital format. This will ease the switch to MTD when it becomes mandatory.
Consult an accountant: If you are in need of help or advice to guide you through the switch to Making Tax Digital, contact an accredited accountant who can help you through the whole process. It is important to get the system right, as misreporting your business information can have detrimental results.
Turas Accountants in Telford specialise in helping businesses and organisations excel with their accounting and bookkeeping. We offer bespoke packages that are tailored to your needs and business growth.
Our team are experts in digital accounting, so we can help you get up to speed with everything Making Tax Digital.