MAKING TAX DIGITAL

WHAT IS MAKING TAX DIGITAL

Making Tax Digital (MTD) is an HM Revenue & Customs (HMRC) initiative designed to modernise the way people submit their taxes in the UK. It requires businesses and individuals to switch from submitting paper returns or spreadsheets to using software which links securely with HMRC systems.

The software must be able to keep digital records that are structured in a way that allows them to be easily exported into an approved digital format so that they can be sent directly to HMRC when required. This will enable customers to complete their tax returns more quickly and accurately, as well as allowing HMRC to access more accurate data about taxpayers.

Why does MTD matter?

MTD eliminates the need for manual filing of returns, saving time and providing greater accuracy when dealing with complex financial data.

It also offers a higher level of transparency between HMRC and taxpayers, allowing taxpayers to view their accounts in real-time through secure online portals. As well as offering improved accuracy and visibility, MTD makes it easier for businesses and individuals to track their income and expenditure, allowing them to plan ahead more effectively.

Making Tax Digital for Income Tax Self Assessment

From April 2026, self-employed individuals and landlords with an income of over £50,000 will be required to keep digital records as well as providing HMRC, through MTD compatible software, quarterly updates on their income and expenditure. Those with an income between £30,000 and £50,000 will be obligated to do this from April 2027.

The government is also set to review requirements of smaller businesses which fall under the £30,000 income threshold. It will take in how MTD for ITSA can help smaller business fulfil income tax obligations.

Making Tax Digital for VAT-registered businesses

As of April 2022, it has been a requirement for all VAT-registered businesses be signed up for MTD and ensure digital records are kept and use third-party software to submit their tax returns to HMRC.

We were recommended to McKenzies Group back in the mid 80’s by our bankers, Lloyds. After a very unpleasant experience with our previous accountant and also a rather accrimonious exit, McKenzies Group set about putting together the financial controls to allow the business to grow. I am pleased to report that 30 years later we are still using McKenzies Group and they have grown with us, providing not only financial reporting but also a range of business advice worthy of any experienced non executive director.