Making Tax Digital (MTD): What You Need to Know
From April 2019, all VAT-registered businesses with a turnover above the VAT threshold have been required to maintain digital records and submit their VAT returns using third-party commercial software. While businesses below the VAT threshold can still voluntarily register and use HMRC’s online portal, the requirement for digital submission applies to those above the threshold.
Key Requirements for MTD for VAT:
Digital Records: Businesses must maintain digital records for VAT purposes.
Third-Party Software: VAT submissions must be made through compatible software. Submissions via the HMRC website are no longer permitted for businesses above the threshold.
MTD for Income Tax Self Assessment (ITSA)
Making Tax Digital is also being extended to Income Tax Self Assessment (ITSA) for self-employed individuals and landlords. This initiative aims to simplify tax reporting and reduce errors by requiring digital record-keeping and quarterly updates to HMRC.
Key Details for MTD for ITSA:
Who It Applies To:
From April 2026, individuals with an annual business or property income of more than £50,000 will need to comply with MTD for ITSA. From April 2027, this will extend to those with an annual income of more than £30,000.
Requirements:
Maintain digital records of income and expenses.
Submit quarterly updates to HMRC using compatible software.
Provide an end-of-period statement and a final declaration to confirm tax liabilities.
Voluntary Sign-Up:
Eligible individuals can voluntarily sign up for MTD for ITSA now to familiarise themselves with the system and benefit from streamlined tax management.
Preparing for MTD
To ensure compliance with MTD for both VAT and ITSA, businesses and individuals should:
Upgrade to compatible accounting software.
Maintain accurate and up-to-date digital records.
Stay informed about HMRC updates and deadlines.
Contact us today to ensure you’re fully prepared
If you need assistance transitioning to MTD or managing your digital tax obligations, our team is here to help. Contact us today to ensure you’re fully prepared for the future of tax reporting