MAKING TAX DIGITAL

In this business consultancy update, we’re reminding our network of property owners, property investors and small businesses of the technological developments in the UK tax system. Making Tax Digital (MTD) is a new technological initiative by the government to modernise our current tax system, bringing it inline with our digital world. His Majesty's Revenue and Customs (HMRC) has undergone a significant digital transformation, with the aim to simplify the tax system, making it more efficient and transparent for businesses and individuals alike. It requires businesses to keep digital records of their income and expenses and submit their tax returns online using compatible software.

To understand the concept of Making Tax Digital, it's important to familiarise yourself with the requirements and guidelines set by the government. This includes understanding the type of records that need to be kept digitally, the deadlines for submitting tax returns, and the penalties for non-compliance. See GOV.UK for further details.


KEY COMPONENTS OF MTD

1. Digital Record-Keeping:

Businesses are required to keep digital records of their income, expenses, and other relevant financial information using MTD compatible accounting software. This shift from manual record-keeping not only reduces the risk of errors, but also provides real-time visibility into financial data.


2. Digital Links:

Digital links must be maintained between different pieces of software used for accounting purposes. This ensures a seamless flow of data, reducing the chances of discrepancies or inaccuracies.


3. Quarterly Reporting:

Instead of the annual tax return, businesses are now required to submit quarterly updates to HMRC through their digital account. This promotes more regular and timely reporting.

 

MTD IMPORTANT DATES

All VAT registered companies had to be MTD compliant by April 2022, inline with HMRC’s deadline for the move to electronic VAT tax returns. So what is next for the rest of us?


1. Sole Traders and Income Tax Self Assessment Returns

  • It will become mandatory for sole traders who report income over £50k, either from trading and / or property income, to submit their tax returns via MTD compatible software from April 2026.

  • This will extend to those with income over £30k from April 2027.

  • HMRC have not yet provided a mandatory date for sole traders who have income under £30k.



2. Companies and Corporation Tax Returns

  • The only update that HMRC have provided regarding Corporation Tax is that MTD will not be mandated before April 2026.

  • The focus of the next mandatory switchover currently remains as Income Tax Self Assessment returns.


Embracing Making Tax Digital with HMRC is not just a legal requirement; it's a step toward a more efficient and transparent financial future. If you find you need assistance with your business tax reporting in light of the upcoming MTD dates, contact us and ensure that you stay ahead of the game.