What is Making Tax Digital?
Making Tax Digital will, eventually, require all businesses to keep digital records by using software that works with MTD and then submitting updates every quarter in order to bring the tax system closer to real-time.
What are the benefits of Making Tax Digital?
According to the government, the reasons for introducing MTD are to:
- Make it easier for both individuals and businesses to get their taxes right and avoid making errors that might lead to fines.
- Make it so that customers can integrate tax management with a range of business processes via software.
- Contribute to wider productivity gains for businesses by encouraging digitalisation.
- Help reduce the amount of tax lost to avoidable errors.
How does MTD affect me?
If you have a VAT-registered business then you have to keep digital records and file your tax returns using compatible software. HMRC sign up businesses to Making Tax Digital for VAT automatically unless they are exempt or have applied for exemption.
With Making Tax Digital for Income Tax, if you are self-employed or a landlord, you will be affected from:
- 6th April 2026 – if you have an annual business or property income of more than £50,000
- April 2027 – if you have an annual business or property income of more than £30,000
MTD for Income Tax Self-Assessment
The new MTD for Income Tax Self-Assessment (ITSA) system was meant to be launched this year (2024), however, this roll-out has been delayed until April 2026 – at the time, the government stated the reason for this was because self-employed professionals and landlords were already facing a ‘challenging economic environment’.
However, concerns have been raised about HMRC’s latest pilot to test MTD for ITSA – the Chartered Institute of Taxation (CIOT) and the Association of Taxation Technicians (ATT) have been particularly vocal about the standards used to evaluate digital service.
The CIOT believes that their recently published seven ‘Principles of Tax Digitalisation’ should be ‘a benchmark against which digital tax services should be measured’.
According to the CIOT and ATT, a digitalised tax system should:
- Enhance existing processes
- Be cost and resource efficient
- Be secure
- Be integrated and adaptable
- Accommodate agents
- Be simple, tested and co-created
- Accommodate accessibility requirements
Do I need to hire an accountant?
Your accountant will be able to help you with any advice or guidance you need when it comes to not only MTD but other areas too.
For example, a good accountant can take care of certain tasks, such as filling in and filing forms (leaving you to concentrate on running your business), ensure you remain compliant with financial liabilities, keep you on top of important deadlines and even provide useful financial advice that could save you money in the long run.
Our Accountants for Freelancers page will give you more information on what we can offer you as an award winning accountancy firm.
If you’d like to sign up or need any further information, please give us a call on 01442 795 100 or you can email jaime.thorpe@dolanaccountancy.com. There’s also the option to contact us via live chat.
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