HMRC’s vision to digitise the UK tax system kicked off in April 2019 with the launch of Making Tax Digital (MTD) for VAT, which applied to all businesses with turnover above the VAT threshold, which is currently £85,000 per annum.
- MTD for VAT, having started in April 2019 extends to all VAT-registered businesses from April 2022
- MTD for income tax, including the self-employed and those with income from property, is scheduled to begin in April 2023
- Ongoing consultation on MTD for corporation tax and for individuals continues, but no start date has been announced
The key points on MTD today are
- Businesses and organisations (including those with income from property) must maintain digital accounting records
- Paper accounting records, or spreadsheets no longer meet the requirements of UK tax law
- Businesses and organisations are required to use a “functional compatible software” to submit updates and returns to HMRC – at the moment this is just really VAT returns
- The easy answer for most small businesses is to use Xero, Sage or Quickbooks
With the Budget due on 3 March 2021 it will be interesting to see if further changes are announced
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