Making Tax Digital (MTD) it’s finally here
Posted on 14th February 2021 at 19:22
Overview of Making Tax Digital
Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.
VAT registered businesses
HMRC has confirmed that there will be no further delays to the introduction of MTD for VAT. The rules were due to come into effect from April 2020 but due to the pandemic, the mandate was delayed one year. From 1 April 2021 all eligible businesses must comply with the requirement or penalties could follow.
MTD is mandatory if your taxable turnover is above the VAT registration threshold of £85,000.
For VAT periods starting on or after 1 April 2021, VAT returns must be filed online to HMRC under MTD using functional compatible software such as Xero or FreeAgent.
Soft landing period will end for VAT periods starting on or after 1 April 2021. With the end of the soft landing period, Cut and Paste will no longer be allowed for the filing of VAT returns so software must be used for the submission.
Online filing via XML software (the system used before MTD which is still used by some non-MTD software products) will cease to be available from 8 April 2021. HMRC has already notified software companies and plans to write to each affected trader before April 2021.
VAT-registered businesses with a taxable turnover below £85,000 will be required to follow Making Tax digital rules for their first return starting on or after April 2022.
If you use FreeAgent or Xero, you are already compliant with the MTD rules.
Making Tax Digital for Income Tax
Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2023.
Making Tax Digital for Corporation Tax
The government has published a consultation on the future design of Making Tax Digital for Corporation Tax and welcomes views from companies and other organisations within the charge to Corporation Tax, agents, professional bodies and software developers. Click Here to read more.
The government will provide businesses with an opportunity to take part in a pilot for Making Tax Digital for Corporation Tax and will not mandate its usage before 2026.
Tagged as: Making Tax Digital, MTD
Share this post: