Making Tax Digital (MTD) is a UK government initiative that aims to modernize the tax system by requiring businesses to keep digital records and submit tax information to HM Revenue and Customs (HMRC) using MTD-compliant software. The first businesses affected were those with a turnover above the VAT threshold of £85,000, which were required to keep digital records for VAT purposes from April 2019.
HMRC introduced MTD to achieve several goals, including improving the accuracy of tax information, reducing errors in data input, making it easier for taxpayers to understand their tax obligations, and providing easier contact with HMRC.
The MTD initiative will affect different businesses at different times. VAT-registered businesses with a taxable turnover below £85,000 will be required to follow MTD for VAT rules from their first return starting on or after April 2022. Self-employed businesses and landlords with annual business or property income above £50,000 will need to follow the rules for Making Tax Digital for Income Tax from 6th April 2026. Making Tax Digital for Corporation Tax will not be introduced before April 2026, and self-employed businesses and landlords with annual business or property income above £30,000 will need to follow the rules for Making Tax Digital for Income Tax from 6th April 2027.
At PBAS, we can help you prepare for MTD and advise you on MTD-compliant software, such as QuickBooks and Xero, to manage your accounting records digitally. We have developed support services to help small businesses through this period of change. If you need assistance with MTD, please contact us to arrange a free initial consultation.