Making Tax Digital
Factsheet on Making Tax Digital (MTD)
Making Tax Digital (MTD) is the most fundamental change to the administration of the tax system for at least 20 years.
The essential elements for businesses and landlords are:
As your accountant I will support you through these changes and provide the ongoing services that you need. However, the changes are so fundamental that it will be necessary to review your current record keeping systems and to reconsider what work you decide to do yourself and which activities you wish to include in the service we provide.
When does it start?
Your start date for MTD depends on the size and structure of your business and your accounting year end. It was proposed to be the first day of the first accounting period ending after the 5 April 2019 or 2020. However this has now been postponed until 2021 at the earliest.
Income Tax (self-employed, partnerships, trusts and landlords who complete self-assessment tax returns):
VAT: From April 2019 VAT registered businesses with turnover in excess of the VAT threshold – currently £85,000 (including limited companies), have to file their VAT returns directly from accounting software. The current online VAT return will continue to be available for VAT registered businesses with voluntary registrations, due to lower turnover, until probably April 2021.
Corporation Tax (limited companies): MTD will become mandatory for corporation tax reporting from no sooner than April 2021. NB those companies with turnovers over the VAT threshold will have been doing their VAT returns via MTD from April 2019.
What are the exemptions?
The smallest businesses and landlords with gross income of less than £10,000 will be exempt. If there is business income and rentals the turnovers are added together to determine whether together they exceed £10,000. Also exempt are those who are not able to engage digitally for religious reasons or due to a factor such as age, disability or location (eg, no availability of broadband).
What do I need to do now?
The action required depends on the size and structure of your business and how you currently keep your records –
Further information about these changes is available on
HMRC website ICAEW website
Making Tax Digital (MTD) is the most fundamental change to the administration of the tax system for at least 20 years.
The essential elements for businesses and landlords are:
- Paper records will no longer be sufficient: It will become mandatory for almost all businesses and landlords (self-employed, partnerships and limited companies) to use software or a spreadsheet to keep accounting records. Paper accounting records will cease to meet the requirements of tax law.
- Quarterly reporting: There will be a requirement to submit updates to HMRC each quarter directly from accounting software, within one month of the end of each quarter.
As your accountant I will support you through these changes and provide the ongoing services that you need. However, the changes are so fundamental that it will be necessary to review your current record keeping systems and to reconsider what work you decide to do yourself and which activities you wish to include in the service we provide.
When does it start?
Your start date for MTD depends on the size and structure of your business and your accounting year end. It was proposed to be the first day of the first accounting period ending after the 5 April 2019 or 2020. However this has now been postponed until 2021 at the earliest.
Income Tax (self-employed, partnerships, trusts and landlords who complete self-assessment tax returns):
- MTD may become mandatory from April 2022 at the earliest for businesses and landlords
- MTD may be used voluntarily from April 2019.
VAT: From April 2019 VAT registered businesses with turnover in excess of the VAT threshold – currently £85,000 (including limited companies), have to file their VAT returns directly from accounting software. The current online VAT return will continue to be available for VAT registered businesses with voluntary registrations, due to lower turnover, until probably April 2021.
Corporation Tax (limited companies): MTD will become mandatory for corporation tax reporting from no sooner than April 2021. NB those companies with turnovers over the VAT threshold will have been doing their VAT returns via MTD from April 2019.
What are the exemptions?
The smallest businesses and landlords with gross income of less than £10,000 will be exempt. If there is business income and rentals the turnovers are added together to determine whether together they exceed £10,000. Also exempt are those who are not able to engage digitally for religious reasons or due to a factor such as age, disability or location (eg, no availability of broadband).
What do I need to do now?
The action required depends on the size and structure of your business and how you currently keep your records –
- Consideration may need to be given to the possibility of an exemption.
- If you currently use accounting software it will need to be upgraded. If you are considering acquiring software, please discuss this with me first.
- If you currently maintain records on paper or a spreadsheet, your processes will need to change. You will need to make your own quarterly submissions to HMRC or provide records to a third party promptly after each quarter-end and engage them to do the bookkeeping and quarterly reporting.
Further information about these changes is available on
HMRC website ICAEW website