What is it?
Making Tax Digital (MTD) - is the requirement to keep digital records to prepare and submit returns to HMRC, using MTD compliant software.
Phase 1 of MTD came into force in April 2019. It became mandatory for all UK VAT registered businesses with a turnover above the VAT threshold of £85,000, to be MTD compliant.
Phase 2 of MTD, for all VAT registered businesses below the registration threshold of £85,000 to be MTD compliant, is scheduled to come into force on 1 April 2022.
Who is it for?
Proposed timescale outlining when MTD might affect you or your business:
- 01 April 2022 - All VAT registered businesses below the registration threshold of £85,000, will be need to be MTD compliant for their first VAT return starting on or after April 2021. (You can voluntarily join the scheme at any time and do not need to wait for the 2022 deadline)
- April 2023 – Self-employed businesses and landlords with an annual income of above £10,000, will also need to become MTD compliant for income tax, from their next accounting period starting on or after 6 April 2023
- 2026 – MTD for Corporation Tax will not become mandatory before 2026
How does it work?
MTD reduces the risk of taxpayers making errors when completing and submitting their returns. It also simplifies and streamlines the submission process, by linking your accounting software to HMRC allowing you to submit your return at a touch of a button.
What should I do next?
As per the proposed timescale set out above, phase 2 of MTD roll out applies to VAT registered businesses below the VAT registration threshold of £85,000.
For businesses falling under this category, the first step is to ensure the software you are using is MTD compliant and to consider when you would like to join the scheme, as you do not need to wait for the April 2022 deadline.
To register for MTD you must:
- Ensure your software is MTD compliant
- Sign up via Gov.UK website
- When your registration has been confirmed, authorise your software
Alternatively, get it touch with Critchleys and we will be able to complete the registration process on your behalf.
TOP TIP: If you pay your VAT by Direct Debit, do not register for MTD close to your VAT return due date. Signing up to close could result in you paying your VAT liability twice. It is advised not to sign up 7 days before or 5 days after your VAT submission due date.
If you have any queries regarding MTD for VAT, would like Critchleys to register your business for MTD for VAT or have any other queries relating to your VAT returns. Please do not hesitate to contact Corina Hall on 01865 261100 or email Corina Hall.
First Published 8 March 2021
Last Updated 8 March 2021
8 March 2021
First published.
Find out more about Corina Hall