Making Tax Digital

Are you aware change is coming.

If you are VAT registered, then you should already be using digital software to keep your records.

However, it is being introduced on a wider scale.

From April 2024, it is being introduced for sole traders, partners and those with rental income of more than £10,000 per annum.

Looking forward to April 2026, it will be introduced for companies and their corporation tax.

We can help you get compliant with relevant software to your need in order to meet the requirements of Making Tax Digital. Please feel free to contact us to discuss your needs and any concerns that you may have with this.

And don’t forget that your initial consultation is free! So you have nothing to lose (and everything to gain) by speaking to us.

A summary of the changes are as follows:

Making Tax Digital – VAT

To comply with MTD for VAT, from April 2022 you must keep all of your VAT records digitally using MTD-compliant software like Xero.

You must also submit your VAT returns to HMRC online rather than complete and send in manual returns by post as in the past. If you don’t, you face a £400 penalty for each wrongly submitted return.

Making Tax Digital – for Income Tax  (MTD ITSA)

Making Tax Digital for Income Tax Self Assessment goes live for most self-employed people, landlords and partners from April 2024.

As with MTD for VAT, you will need to use approved software to submit your Self Assessment Tax Returns. However, instead of making an annual tax return, you will need to make quarterly submissions. These will due on the fifth day of August, November, February and May. This means most people will make their first submission on 5th August 2024.

As well as submitting quarterly returns, you’ll need to submit an End of Period Statement by 31st January each year. This lets you make adjustments, such as to capital allowances and losses. You can also declare other income and capital gains via a Finalisation Statement, which is due on the same date.

Although you will have to make quarterly Self Assessment Returns via your software, you will still pay your Income Tax on the same dates – the main bill by 31st January and your payment on account by 31st July.

Making Tax Digital – Corporation Tax

Making Tax Digital for Corporation Tax will be the last plank of MTD to be put in place. There will be a pilot scheme in 2024 and it will become mandatory in April 2026.

HMRC launched a consultation on MTD for Corporation Tax, which closed in March 2021. The key changes it proposed were for businesses to:

  • Maintain digital records of income and expenditure
  • Provide HMRC with quarterly summary updates using MTD compatible software
  • Making an annual Corporation Tax return using compatible software.

We will update this section as more information is released about the scheme.