Making Tax Digital delays, modifications and extensions – Sage Recommendation United Kingdom

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Making Tax Digital delays, modifications and extensions – Sage Recommendation United Kingdom

Making Tax Digital (MTD) is the most important tax shake updated, with HMRC aiming to make the UK “probably the most digitally superior tax administrations on the earth”.

Whereas there have been some shifting deadlines, MTD might be right here to remain.

Learn on for a more in-depth take a look at a few of the principal delays and modifications to MTD, as properly the incoming necessities throughout VAT, earnings tax and company tax.

Right here’s what we cowl:

A central pillar of Making Tax Digital is that taxpayers will give HMRC particulars of their income and prices no less than 4 occasions a 12 months, so there’ll be an correct, up-to-date image of how a lot tax is due all year long relatively than leaving every little thing to an annual tax return.

HMRC is introducing Making Tax Digital in phases.

MTD for VAT started from 1 April 2019, that means Making Tax Digital became law for VAT-registered companies over the VAT threshold of £85,000.

Since April 2022, MTD applies to all VAT companies (this consists of these under the VAT threshold).

Then from April 2024, MTD for Earnings Tax Self Evaluation (also called MTD for Earnings Tax or MTD for ITSA) will come into power.

Meaning sure sole merchants and landlords might want to begin reporting their earnings utilizing MTD. Normal partnerships might be included from 2025.

And no ahead of 2026, integrated companies must adhere to MTD for Company Tax.

HMRC claims Making Tax Digital will result in a more practical and environment friendly tax system, permitting taxpayers to file their tax returns extra simply and with higher accuracy.

For some, MTD will finally imply giving HMRC extra info and on a extra common foundation, however most duties required to finish the assorted steps of MTD might be automated.

Utilizing cloud accounting software, you would use MTD as a chance to truly scale back your tax-related admin burden, leaving you with extra time to deal with extra value-added actions for your corporation.

In response to the MTD policy paper first printed by the federal government in December 2015, MTD was initially supposed to go reside for many companies, together with sole merchants and landlords, by the top of 2018.

Implementation of Making Tax Digital has taken for much longer than anticipated, with the federal government asserting numerous delays/modifications:

  • In mid-2017, the federal government introduced it was giving taxpayers extra time to adapt to MTD. Solely companies with turnover above the VAT threshold of £85,000 would want to change to MTD for VAT, and solely by April 2019. Moreover, the federal government stated nobody can be requested to make use of MTD for different taxes and replace HMRC on a quarterly foundation till no less than 2020.
  • In 2020, with the onset of the coronavirus pandemic, the federal government signalled additional delays to MTD because it sought to take the stress off already struggling companies. The so-called smooth touchdown for MTD implementation was prolonged till April 2021. This meant digital linking rules have been quickly relaxed to permit copy and paste to proceed for a restricted interval.
  • In July 2020, the federal government stated VAT-registered companies that had signed up for voluntary VAT, with turnover under the £85,000 threshold, would want to change to MTD from April 2022. It additionally stated sole merchants and landlords with turnover above £10,000 would want to observe MTD for Earnings Tax guidelines for his or her first full accounting interval starting after April 2023.
  • In October 2020, the federal government introduced that Making Tax Digital for Company Tax would solely apply from 2026 on the earliest.
  • In September 2021, the federal government postponed MTD for Income Tax until April 2024. This had been anticipated to develop into regulation in April 2023 and would have affected 4 million self-employed individuals and landlords with enterprise/property earnings above £10,000.

Whereas there have been some delays, HMRC has mapped a course to get taxpayers doing as a lot on-line as doable.

If you happen to’re working a enterprise, you’ll most certainly want to change to accounting software program and get some digital functionality going in the end.

As issues stand, companies with £10,000 or much less in turnover received’t be required to observe MTD for Earnings Tax, although they might come beneath MTD for VAT guidelines if they’re VAT registered.

The excellent news is that HMRC-recognised accounting software is offered to make sure the change to MTD is as seamless as doable.

Your accounting software program will present common and well timed information to HMRC, so preparing for MTD is all about having the correct software program in place.

Nonetheless, there is likely to be extra to become familiar with for these companies which have by no means engaged with accounting software program or apps earlier than and people with little or no use of the web of their enterprise.

Taking the time now to get used to the software program, forward of the related MTD implementation dates, will definitely be useful. If you happen to want help with it, converse to the software program vendor or your accountant when you have one.

As well as, the delay to MTD for Earnings Tax means companies that might want to adhere to its guidelines have extra time to organize.

Making Tax Digital for VAT software program

Uncover how Sage Accounting can assist you get your MTD for VAT submission proper, calculate your invoice and submit your VAT Return with ease.

Find out more

Right here’s a fast spherical up of what you want to know in regards to the totally different phases of MTD.


VAT-registered businesses with taxable turnover above £85,000 have been required to observe Making Tax Digital guidelines since April 2019.

This implies they have to maintain digital data and file VAT Returns by way of useful appropriate software program.

Since April 2022, VAT registered companies beneath the brink have been included – that means all companies which might be VAT registered have to observe MTD for VAT guidelines.

Solely those that can efficiently argue ‘digital exclusion’ – these that may present they’re unable to make use of apps and accounting software program as a consequence of components reminiscent of the place they’re based mostly, faith or incapacity – are exempt.

Earnings Tax

Sole traders and landlords with greater than £10,000 in annual turnover have to observe MTD for Earnings Tax guidelines from April 2024.

For common partnerships with greater than £10,000 in annual turnover, they should observe the brand new guidelines from April 2025.

Company Tax

Corporations received’t have to report beneath MTD for Company Tax till no less than April 2026.

HMRC hopes to start a pilot scheme permitting corporations to start out submitting utilizing MTD for Company Tax from April 2024.

Can I nonetheless use bridging software program for MTD?

Sure, you should use bridging software for submitting VAT submissions with spreadsheets – with VAT Returns, you at the moment are meant to incorporate digital hyperlinks together with your authentic data.

You also needs to nonetheless be capable to use spreadsheets with bridging software program in MTD for Earnings Tax.

What’s the deadline for MTD?

Since April 2022, nearly all VAT-registered companies must observe MTD for VAT, no matter earnings.

Two years later, in 2024, sole merchants and landlords with a turnover above £10,000 will come beneath the brand new MTD for Earnings Tax guidelines, whereas they’ll apply to common partnerships utilizing this identical turnover threshold from April 2025.

MTD for Company Tax will finally apply to all integrated corporations, although this isn’t anticipated to be necessary till no less than April 2026 on the earliest.

Is there a delay to Making Tax Digital Part 2?

Part 2 can seek advice from the requirement for all VAT-registered companies to use MTD for VAT from April 2022.

Nonetheless, the time period may also be utilized in reference to the MTD for Earnings Tax go-live date, which is now from April 2024 for sole merchants and landlords, and from April 2025 for common partnerships.

MTD for Earnings Tax had been scheduled to start out from April 2023 however the authorities introduced a delay in September 2021.

Has there been an extension to the smooth touchdown for Making Tax Digital?

Sure, HMRC did announce a ‘smooth touchdown interval’ for companies adopting MTD for VAT in April 2019, permitting them to proceed copying and pasting from one utility to a different till April 2020.

Owing to the pandemic, the federal government prolonged the smooth touchdown interval for an additional 12 months, till April 2021.

Nonetheless, companies ought to now be utilizing correct digital hyperlinks for VAT Returns – copying and pasting of information is not allowed.

There’s no expectation of a smooth touchdown interval for MTD for Earnings Tax.

Making Tax Digital is a chance to completely digitalise your tax admin.

The automation that cloud accounting software offers means a lot of the duties related to MTD can primarily be accomplished for you.

Meaning you’ll be able to spend extra time working your corporation and creating worth to your clients.

Editor’s observe: This text was first printed in November 2021 and has been up to date for relevance.

Making Tax Digital for VAT guidelines

Obtain your free (and simply printable) Making Tax Digital guidelines and observe the steps that will help you together with your VAT Return processes.

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