Making tax digital: overview and timeframe

Overview

Making tax digital (MTD) is the government’s plan to move to a fully digital tax system. MTD is to apply to unincorporated and incorporated businesses, self-employed people and landlords and other taxpayers (e.g. employees and pensioners).

Under the plan:

• what is known as MTD for income tax self-assessment (MTD for ITSA) will require unincorporated businesses, self-employed people and landlords (with turnover over £10,000) to:

  • keep income and expense records digitally;

  • make quarterly reports of income and expenses to HMRC through software or an app within one month of the end of the quarter; and

  • submit an end of year declaration to HMRC through their digital tax account by 31 January following the end of the tax year;

• individuals with secondary income of more than a certain threshold from self-employment or property will use their personal tax account to tell HMRC when things change and will no longer be required to complete tax returns at the end of the year;

• businesses will be required to update HMRC quarterly for VAT obligations through their accounting software (this has started); and

• companies will be required to update HMRC quarterly for corporation tax obligations through their accounting software.

Timescale

MTD for VAT

Businesses with a turnover above the VAT threshold have generally been mandated to use MTD in relation to their VAT obligations from April 2019. There was a six-month deferral period for certain prescribed businesses. Businesses had until their first VAT return‎ period starting on or after 1 April 2021 to put digital links in place between software products (existing links must be maintained). MTD for VAT was extended to businesses registered for VAT, but with turnover below the VAT threshold in April 2022.

MTD for ITSA

The appointed date on which the digital reporting and record keeping provisions come into force for ITSA is 6 April 2024 (a year later than planned).

In line with the above regulations and based on a Government statement and HMRC guidance the MTD for ITSA requirements will apply from the tax year beginning on 6 April 2024. However general partnerships will not be required to join MTD for ITSA until the tax year beginning on 6 April 2025, and the date when all other partnerships will be required to join is to be confirmed later.

MTD for CT

Between 12 November 2020 and 5 March 2021, HMRC ran a consultation considering the potential design of MTD for corporation tax. The proposed date to commence the voluntary pilot for MTD for corporation tax is April 2024, with compulsory use expected to follow from 2026 at the earliest.

Contact Ashored for help and support with Making Tax Digital.