HMRC has announced that Making Tax Digital will be delayed for businesses and the self-employed by another year. It will now be introduced in April 2024 for sole traders and landlords with an annual income over £10,000.
Making Tax Digital already operates for VAT-registered businesses with turnovers in excess of £85,000. After coming into effect for them in April 2019, other businesses were expected to join the system the following year. But HMRC delayed the dates of implementation after consultations – and then the pandemic pushed the dates back further.
What is MTD?
Making Tax Digital (MTD) is a government scheme designed to encourage every individual and company to submit taxes digitally. It is part of HMRC’s plans to become one of the most technologically advanced tax administrators in the world.
With specialist software, users send their financial data – such as income and expenditure – to the government tax collectors digitally. The software you use must be HMRC-approved and have the ability to integrate with their Application Programming Interface (API). We recommend QuickBooks to our clients and offer full training whether you’re a client or not.
HMRC sends a unique digital account number and this allows a company owner to monitor their tax situation at any time. For many, this is a useful element as they can keep on top of their taxes.
If MTD is new to you, checking out our original blog about before its introduction gives you the full details.
Dates for Making Tax Digital
The MTD deadline came into effect in April 2019 for VAT-registered businesses with a turnover above £85,000. HMRC last week confirmed the following dates for Making Tax Digital implementation for other businesses:
- April 2023: VAT-registered businesses with a taxable turnover below £85,000.
- April 2024: Self-employed businesses and landlords with annual income over £10,000.
- Specific dates haven’t been set for Corporation Tax, but HMRC says it will take place between now and 2026.
Why is HMRC switching to Making Tax Digital?
There are many benefits to the MTD scheme. For example, it future proofs your business so you’re safeguarded against any changes to the rules in years to come.
While it may appear scary, it will eventually make you more efficient! As much of the software is automated, it will make the tax and finance processes quicker and easier – and the chance of errors and miscalculations will be reduced. By submitting returns at least four times a year, companies will have much more control about when they pay, rather than a single stressful period once a year.
Is MTD mandatory?
Oh yes! Be sure to make sure you’re compliant well ahead of the deadlines above. Further guidance will be released on the government website in the coming months, so you can keep tabs there. We’ll also keep our clients updated.
MTD and the self-employed
When HMRC implements MTD for the self-employed, they will also see other changes. Rather than annual reporting, this will become quarterly, as we’ve mentioned. But this will be a big change for self-employed people to switch to. Some representatives of the self-employed say it will increase their workload and could mean they find it more difficult to do fee-paying work due to their tax obligations.
We recognise the issues that some people worry about when adapting to MTD. Our advice is to switch to HMRC-approved software as soon as possible so you are ahead of the deadline. Make sure you do your research about software well in advance of the deadline. If you want to know more about our choice, QuickBooks, we explain why we chose it in an earlier blog.
The earlier you move to MTD the less chance of falling foul of the deadlines and penalties HMRC will eventually enforce.
For more details, contact us about MTD and future training and workshops on MTD.