Helping you make the transition

Making Tax Digital is a government initiative to make it easier for businesses and individuals to get their tax right and to keep on top of their affairs.

It came into effect on 1 April 2019 for VAT registered businesses with taxable turnover above £85,000.

From March 2021 HMRC will be moving all remaining businesses with a taxable turnover above £85,000 onto MTD. If you have not yet signed up to MTD you must do so now or you may be charged a penalty.

For those businesses with a turnover below £85,000, MTD for VAT will apply from April 2022.

VAT returns will need to be submitted directly from compatible software. You WILL NOT be able to use the current HMRC VAT portal to input your VAT return figures. They will have to go through the new 'digital' gateway.

Frequently Asked Questions

What does Making Tax Digital mean?

Making Tax Digital is the government initiative to digitise the tax system. Eventually all individuals and registered businesses will be required to keep digital records of some description and send electronic submissions to HMRC using compliant software.

VAT is the first phase of this plan, and by April 2022 it will be compulsory for all VAT registered businesses to comply with the Making Tax Digital rules.

From April 2023, Making Tax Digital for Income Tax will come into force. This will apply to self-employed people and landlords with an annual income of over £10,000


How am I affected?

In order to comply, your VAT records need to be maintained digitally in MTD compatible software which has the ability to submit your VAT return directly to HMRC.

You will not be able to log in to your HMRC account to submit your return.


What software is available to me?

HMRC have ensured that there are a number of functional compatible software options available. We have partnered with the market leaders in this space: QuickBooks Online and Xero and would highly recommend one of these packages.

Both are fully compliant with Making Tax Digital, are easy to use and will save you valuable time.

We also support Sage which is compliant if you have an up-to-date version.

Making Tax Digital deadlines

For who

Date

VAT

VAT registered businesses with a turnover below the threshold (below £85,000)

April 2022

Income Tax

Self-employed people and landlords with an annual businesses or property income of over £10,000

Next accounting period starting on or after 6 April 2023

Software

Must have digital links between the software used

1 April 2021

Making Tax Digital for VAT

From April 2022 all businesses below the VAT registration threshold will need to comply with the Making Tax Digital rules.

The digital records you need to keep required from HMRC are as follows:

  • Business name and contact details
  • VAT number and details of any schemes used
  • VAT on supplies made and received
  • Adjustments to returns
  • Time of supply (tax point)
  • Rate of VAT charged on supplies made
  • Reverse charge transactions (if your software doesn’t record them, you need to record them twice as a supply made and a supply received)
  • Daily gross takings (DGT) if you use a retail scheme
  • Purchases of assets you can reclaim tax on if you use the Flat Rate Scheme
  • Value of sales made and total output tax on Gold Accounting Scheme purchases (if applicable)
  • Documents covering multiple supplies made or received on behalf of your business (by volunteers, third party businesses or employees)

The use of a cloud accounting system such as Xero, Quickbooks or Sage will help to make your record keeping much more streamlined and easier to manage. You will still need to keep these records for 6 years.

Making Tax Digital Software

Compatible software must be used to send digital tax returns. Your digital records don't all have to be on one piece of software, but HMRC says that you “must have links between the software you use by your first VAT period after 1 April 2021.”

You can link software in a number of ways, by emailing records or simply linking cells in a spreadsheet. You need to use compatible software to submit your tax return though. HMRC has a list of compatible products if you are not sure.