What is Making Tax Digital (MTD)?
Making Tax Digital (MTD) is a UK government initiative aimed at making it easier for individuals and businesses to keep on top of their tax affairs and get their tax right. It was introduced by HM Revenue & Customs (HMRC) and is part of a broader plan to modernise the tax system.
Key points about Making Tax Digital:
- Digital Record-Keeping: Businesses and individuals must keep their financial records in a digital format using compatible software (like QuickBooks, Xero, Sage, etc.).
- Quarterly Updates: Instead of filing one big tax return once a year, you send quarterly updates to HMRC summarising your income and expenses.
MTD for VAT:
- From April 2019: Businesses with a taxable turnover above the VAT threshold (£85,000) had to follow MTD rules for VAT.
- From April 2022: MTD for VAT applied to all VAT-registered businesses, regardless of turnover.
MTD for Income Tax Self-Assessment (ITSA):
- Will apply to self-employed individuals and landlords earning over £50,000 from April 2026.
- Those earning over £30,000 will be included from April 2027.
- Individuals earning under £30,000 won’t be mandated (for now).
MTD for Corporation Tax: Still in the planning phase — not expected to roll out before 2026 at the earliest.
Benefits (According to HMRC):
- Fewer errors in tax returns.
- Easier to manage tax in real time.
- Less last-minute stress at year-end.
