Making Tax Digital (MTD)
April 2019 was the first step taken towards a digital tax system when businesses above the VAT threshold were required to keep digital records and provide VAT returns using MTD-compliant software.
Since its introduction more than 1.8 million business have signed up to MTD for VAT and over 6 million VAT returns have been submitted using the service.
With a 2018/19 tax gap due to avoidable mistakes of £8.5 billion both HM Treasury and HM Revenue & Customs (HMRC) are keen to modernise tax administration to make it easier for people to pay tax and reduce avoidable errors and fraud.
Road map
The next steps in the long-term digitisation plan will extend MTD for VAT as well as introduce it as a requirement for the self employed and landlords.
1. From April 2022 MTD will be extended to all VAT registered businesses regardless of turnover.
2. From April 2023 MTD will be introduced to taxpayers who file tax returns for business or property with turnover above £10,000 annually.
Sole traders and landlords
The pilot service of Making Tax Digital for Income Tax that has run since April 2017 is due to be expanded from April 2021 before the MTD rules then become compulsory from 6 April 2023.
Sole traders and landlords with turnover above £10,000 will be required to keep their records digitally and to submit their tax return directly from those records using MTD-compatible software.
Instead of an annual Income Tax return, businesses and landlords will be required to send HMRC a quarterly summary update of their business income and expenditure with a finalisation process at the end of the year.
Next steps
HMRC have expressed their intention to consult closely with agents and other stakeholder groups on the detail for implementing their vision for tax administration reform.
How can we help?
At Fairfields Tax we can prepare your current Self Assessment tax return and help get you ready for Making Tax Digital.
Please do contact us for a free, no obligation quote for help with your tax return.
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