What is MTD?

Making Tax Digital (MTD) is the governments initiative for digitalising and streamlining the tax return process. All returns are submitted to HMRC via compatible software making the process simpler, quicker and in real time.

MTD has been implemented in a stages with the MTD for VAT program starting on April 1, 2019. All VAT registered businesses with a taxable turnover above the VAT threshold were required to be compliant by April 1, 2022. This has demonstrated the benefits to businesses and the tax system of the digital ways of working. You can find out more about VAT filing and the new penalty system form HMRC here in our recent blog post.
What are the dates for MTD ITSA?

MTD for Income Self-Assessment (ITSA) will be introduced in phased stages, starting in 2026. Initially due to start in 2023, however, following a government announcement at the end of 2022, landlords and the self-employed will now have longer to prepare.

  • By April 2026 self-employed individuals and landlords with a yearly turnover of £50,000 and above will be required to comply with the new MTD ruling. This includes sending quarterly updates to HMRC via MTD compatible software, including an End of Period Statement (EOPS) and a Financial Declaration once a year.
  • By April 2028 self-employed individuals and landlords with a turnover of £30,000 and above a year will be required to join the scheme.
  • The government are currently reviewing whether smaller businesses with a turnover below £30,000 will join.
  • There is currently no set date for when partnerships will be required to join the scheme, however, the latest statement confirms that the government remains committed to introducing MTD ITSA to partnerships at a future date.

Why the delay?

HMRC have said the main reason for the delay and new staggered join dates is to relieve the pressure on businesses caused by the current economic climate. They still believe there are huge benefits in digitalising tax, however they understand the transition may feel like a big change to some businesses. The scheme is part of the governments plan to fully digitalise the tax system and reduce the burden of tax returns for small businesses.

Ben Withinshaw, SHA Director believes MTD will have many benefits to SMEs.

“In the current economic climate, preparation and planning are essential for small businesses to ensure they are successful. MTD will help with planning and in doing so stop any surprises arising. Whilst this might appear an onerous obligation by HMRC it really isn’t too tricky and something we as an accountancy firm can help with.”

It looks like MTD is here to stay and is something we all need to prepare for! Are you at a loss on where to start? We can help you! From discussing when you and your business will fit into the new timeline, to preparing your returns to be compliant and ready for the new legislation. We know these are difficult times so please do get in touch if you would like an initial chat or further information.

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