What You Need to Know About MTD
Making Tax Digital (MTD) is HMRC's initiative to modernize the UK tax system by requiring digital record keeping and electronic submissions. Here's what businesses need to know about the current requirements and upcoming changes.
1. MTD for VAT
Since April 2022, all VAT-registered businesses must comply with MTD for VAT:
- Keep digital records of all VAT transactions
- Use MTD-compatible software to submit VAT returns
- Maintain digital links between all software components
- Exceptions exist for businesses with turnover below £10,000
2. MTD for Income Tax (Coming April 2026)
Self-employed individuals and landlords with annual income over £50,000 will need to comply with MTD for Income Tax from April 2026:
- Quarterly digital updates of income and expenses
- End of Period Statement (EOPS) after tax year ends
- Final declaration replacing Self Assessment
- Those with income £30,000-£50,000 join from April 2027
3. Choosing MTD-Compatible Software
Key considerations when selecting software:
- Check HMRC's list of approved providers
- Ensure it meets all MTD requirements
- Consider integration with other business systems
- Evaluate costs vs features needed
4. Digital Record Keeping Requirements
MTD requires businesses to maintain specific digital records:
- Business name, address, VAT number
- VAT accounting scheme used
- VAT on goods/services supplied and received
- Adjustments, corrections and special schemes
5. Preparing for MTD
Steps to get ready for MTD compliance:
- Assess current record keeping processes
- Identify gaps in digital capabilities
- Research and implement suitable software
- Train staff on new processes
- Consider professional advice for complex situations