What is Making Tax Digital?
Making Tax Digital (MTD) is an initiative first announced in the Government’s March 2015 Budget and aims to create ‘a transformed tax system and the end of the tax return’. It plans to ‘make it easier for individuals and businesses to get their tax right and keep on top of their affairs’ by creating an online system allowing taxpayers to sign in and access their own tax accounts through HMRC avoiding costly recording mistakes and potential fines.
The MTD initiative hopes to eliminate the need of the annual tax return for millions of taxpayers by 2020.
When will the Making Tax Digital scheme start?
Every individual and business already has access to their own personalised digital tax account where they can view the tax details and records HMRC holds for them.
The Making Tax Digital scheme is currently in the consultation phase and there are still many unknowns as to how the scheme will work.
The changes are being introduced gradually (see the timetable below) starting with Income Tax for businesses, self-employed people and landlords with annual turnover above the VAT threshold (£85,000) from April 2018.
In 2019 Income Tax of all businesses, self-employed people and landlords with an annual turnover between £10,000 and £85,000 will move to the MTD system.
And finally, the VAT (2019) and Corporation Tax (2020) elements for large businesses will be piloted and rolled out.
What Do I Need To Do Now?
In the Spring 2017 Budget, the Government announced that businesses with an annual turnover below the VAT registration threshold will have an extra year (April 2019)