Tag: Making Tax Digital

Government announces phased mandation of Making Tax Digital for Income Tax

Self-employed individuals and landlords will have more time to prepare for Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA), following announcement by the UK Government yesterday.  

Understanding that self-employed individuals and landlords are currently facing a challenging economic environment, and the transition to MTD for ITSA represents a significant change to taxpayers and HMRC for how self-employment and property income is reported, the government is giving a longer period to prepare for MTD. The mandatory use of software is therefore being phased in from April 2026, rather than April 2024.  

From April 2026, self-employed individuals and landlords with an income of more than £50,000 will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software. Those with an income of between £30,000 and £50,000 will need to do this from April 2027. Most customers will be able to join voluntarily beforehand meaning they can eliminate common errors and save time managing their tax affairs.

The government has also announced a review into the needs of smaller businesses, and particularly those under the £30,000 income threshold. The review will consider how MTD for ITSA can be shaped to meet the needs of these smaller businesses and the best way for them to fulfil their Income Tax obligations. It will also inform the approach for any further roll out of MTD for ITSA after April 2027. 

Mandation of MTD for ITSA will not be extended to general partnerships in 2025 as previously announced. The government remains committed to introducing MTD for ITSA to partnerships in line with its vision set out in the Tax Administration Strategy.  

Victoria Atkins, Financial Secretary to the Treasury, said: “It is right to take the time to work together to maximise the benefits of Making Tax Digital for small businesses by implementing the change gradually.

“It is important to ensure this works for everyone: taxpayers, tax agents, software developers, as well as HMRC.

“Smaller businesses in particular should be able to experience the benefits of increased digitalisation of Income Tax in a way which meets their needs. That is why we are also today announcing a review to establish the best way to achieve this.”

Jim Harra, Chief Executive and First Permanent Secretary, HM Revenue and Customs, said: “HMRC remains committed to the delivery of Making Tax Digital as a critical part of our strategy for digitalising and modernising the tax system, but we want to make sure we get this right and deliver it effectively.  

“A phased approach to mandating MTD for Income Tax will allow us to work together with our partners to make sure that our self-employed and landlord customers can make the most of the opportunities this will bring.” 

The announcement relates to MTD for ITSA only. Making Tax Digital for VAT has already been implemented and is demonstrating the benefits to businesses and the tax system of digital ways of working.  

Less than one month left for VAT businesses to be ready for Making Tax Digital filing

HM Revenue and Customs (HMRC) is reminding businesses that from Tuesday 1 November, they will no longer be able to use their existing Value Added Tax (VAT) online account to submit VAT returns.  

By law, all VAT-registered businesses must now sign up to Making Tax Digital (MTD) and use compatible software to keep their VAT records and file their returns.  

MTD’s aim is to help businesses get their tax right first time by reducing errors, making it easier for them to manage their tax affairs by going digital, and consequently helping them to grow. 

More than 1.8 million businesses are already benefitting from the service, and more than 19 million returns have been successfully submitted through MTD-compatible software so far.  

In less than one month, businesses who file their VAT returns on a quarterly and monthly basis will no longer be able to submit them using their existing VAT online account, unless HMRC has agreed they are exempt from MTD.  

If businesses do not file their VAT returns through MTD-compatible software, they may have to pay a penalty. Even if a business currently keeps digital records, they must check their software is MTD compatible and sign up for MTD before filing their next return. 

https://youtu.be/OyWJz0fSDE4

Richard Fuller MP, Economic Secretary to the Treasury, said: “Making Tax Digital can help businesses get their tax right first time, which cuts the administration burden and frees up time for them to get on with what matters most to them – growing their business.

“I encourage any VAT-registered businesses still to register for Making Tax Digital to get online and sign up.”

If a business hasn’t already signed up to MTD or started using compatible software, they must follow these steps now: 

Step 1. Choose MTD-compatible software – a list of software, including free and low-cost options, can be found on GOV.UK. 

Step 2. Check the permissions in the software – once a business has allowed it to work with MTD, they can file VAT returns easily. Go to GOV.UK to learn how to do this and search ‘manage permissions for tax software’. 

Step 3. Keep digital records for current and future VAT returns – a business can find out what records need to be kept on GOV.UK. 

Step 4. Sign up for MTD and file future VAT returns using MTD-compatible software – to find out how to do this, go to GOV.UK and search ‘record VAT’. 

If a business is already exempt from filing VAT returns online or if their business is subject to an insolvency procedure, they will automatically be exempt.

A business can check if they can apply for an exemption from MTD on GOV‌‌‌.UK if it is not reasonable or practical for them to use computers, software or the internet. HMRC will consider each application on a case-by-case basis.    

If a business is new and is not yet registered for VAT, they will automatically be signed up for MTD while registering for VAT through HMRC’s new VAT Registration Service (VRS). 

Registering via this online service not only means a faster VAT registration and improved security, but also helps new businesses to be fully compliant with MTD requirements from Day 1 – although they will still need to get the right software to submit their VAT returns.  

A range of accessible help is available online through GOV.UK, webinars and videos as well as through HMRC’s Extra Support Service. 

Thousands of people have also benefitted from HMRC’s live webinars, which offer support on filing digitally and explain how it can help businesses. HMRC is continuing to communicate directly with businesses and agents to support them as they transition to MTD for VAT. 

HMRC: Less than a week to go for Making Tax Digital

Businesses have less than a week to prepare for Making Tax Digital (MTD) for Value Added Tax (VAT) becoming mandatory for VAT-registered businesses on 1 April, HM Revenue and Customs (HMRC) said today.

MTD helps taxpayers get their tax returns right by reducing common mistakes as well as saving time managing their tax affairs and is a key part of the overall digitalisation of UK tax.

Evidence shows MTD is succeeding in its central aims of reducing errors, while also making it faster to prepare and submit returns, and boosting productivity for businesses.

New research, conducted by HMRC and peer reviewed by independent academics, shows MTD is likely to have generated increased revenue through reducing errors in both 2019 and 2020.

Nearly 1.6 million taxpayers had joined MTD for VAT as of December 2021 with more than 11 million returns successfully submitted. Around a third of VAT-registered businesses with taxable turnover below £85,000 have voluntarily signed up to MTD for VAT ahead of April 2022, and thousands more are signing up each week.

VAT-registered businesses that have not yet signed up to MTD for VAT should do so now. All VAT-registered businesses must use MTD for VAT for their first VAT return starting on or after 1 April 2022.

Businesses should use the time left to choose the software that is right for them, whether that is one of the simple free options available, or a more advanced product for those with more complex affairs.

Lucy Frazer, HM Treasury’s Financial Secretary to the Treasury, said: “Businesses using MTD are saving time on their tax affairs, streamlining their processes and boosting their productivity as a result.

“Our first move towards a modern, digital tax service – MTD makes it easier for businesses to get their tax right first time.”

There is a range of support and information available for those that need it – including accessible online content such as YouTube videos, GOV.UK help pages and HMRC’s Extra Support service.

Agents can sign up on behalf of a business, although businesses remain responsible for meeting their VAT obligations. Those who do not join may be charged a penalty for failure to do so.

There are a range of compatible software products available for MTD for VAT, allowing businesses to choose which tools they use to run their business and tax affairs. A list of software compatible with MTD for VAT, including free and low-cost options, can be found on GOV.UK.

HMRC understands that some businesses will find it easier to comply with MTD than others. For those who need more help and support on signing up for MTD, HMRC is running a series of webinars.

Some VAT-registered businesses may be eligible for an exemption from MTD, if it is not reasonable or practicable for them to use digital tools for their tax. If a business has previously been granted an exemption for VAT online filing, this will carry over to MTD VAT requirements. Go to GOV.UK for more information on whether an exemption may apply.

Example MTD case studies from businesses who are currently benefitting from MTD for VAT can be found on YouTube.

https://youtu.be/OyWJz0fSDE4?list=PL8EcnheDt1zi1ipk1qexrwdAU5O6LS84a

To sign up to MTD VAT, businesses, or an agent on a businesses’ behalf, need to:

Step 1: Visit GOV.UK and choose MTD-compatible software
Step 2: Keep digital records starting from 1 April 2022 or the beginning of their VAT period
Step 3: Sign up and submit their VAT Return through MTD