What’s Happening With Making Tax Digital?
Are you clued up on what’s happening with HMRC’s Making Tax Digital (MTD) initiative? Launched in 2019, this scheme requires businesses of all sizes to record, submit, and pay taxes online. For many, this change has seen processes switch from paper accounting to the use of digital platforms.
Keep reading to discover the latest MTD updates, and learn how Hysons can provide unrivalled support when handling this new way of managing tax.
What’s the Purpose of Making Tax Digital?
>MTD was launched as a way for HMRC to modernise the UK tax system. By requiring tax obligations to be managed digitally, there is less chance of errors occurring plus more options become available to work collaboratively with business owners. Furthermore, maintaining online records ensures tasks, such as audits or tax investigations, are managed more efficiently in a timely manner.
The switch to MTD is also intended to encourage all business owners, from sole traders to limited company directors, to optimise digital software for financial planning. This improves compliance across the board, offering stronger collaboration between HMRC and business owners.
Why is Making Tax Digital Important?
The main goals of Making Tax Digital are to:
- Reduce errors in tax returns
- Simplify the tax process for businesses and individuals
- Ensure timely and accurate tax submissions
- Move away from paper-based record keeping
By embracing digital tax solutions, businesses can streamline their accounting processes, improve accuracy, and stay compliant with HMRC regulations.
Who Does Making Tax Digital Affect?
MTD initially applied to VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000). However, the scope is expanding:
- VAT-registered businesses below the threshold: Since April 2022, all VAT-registered businesses must follow MTD rules.
- Income Tax Self Assessment (ITSA): MTD for ITSA will affect self-employed individuals and landlords with annual business or property income above £50,000 from April 2026, and above £30,000 from April 2027.
- Corporation Tax: MTD for Corporation Tax is expected to follow in the coming years, with pilot schemes already underway.
Key Requirements of Making Tax Digital
To comply with MTD, businesses and individuals must:
- Keep digital records: Maintain digital records of all transactions using compatible accounting software.
- Use MTD-compatible software: Submit VAT returns and other tax information directly to HMRC through approved software.
- Submit updates quarterly: For MTD for ITSA, quarterly updates will be required, in addition to the end-of-period statements and final declarations.
Is Making Tax Digital Mandatory?
MTD has been in the works for a number of years, with several delays and setbacks to the original agenda. Some elements of MTD are now in use, and others are likely to be introduced in the near future. Furthermore, although MTD is not compulsory yet for all business owners, many have already chosen to make the change in order to get used to the new processes well in advance of mandatory dates.
Currently, MTD is in place for handling VAT. This means that all VAT-registered companies must keep digital records and file quarterly VAT returns using compatible software. Having been mandatory since April 2019 when MTD was introduced, the process is designed to help HMRC easily investigate any fraud cases.
While other MTD requests are currently optional, this will likely change in April 2026. At this point, MTD will become mandatory for sole traders, landlords, and the management of corporation tax. All qualifying individuals will need to maintain digital records and submit quarterly updates to ensure closer attention is paid to tax obligations.
How Can Hysons Support with MTD?
Although MTD offers plenty of benefits in terms of efficiency, the scheme means businesses need to make a variety of changes to how they operate.
Whether you are not yet using MTD and should be or you will need to change how you work in the future, our team can help. Our business planning services ensure that all elements of a company’s financial structure are ready for digital tax operations. From bookkeeping to pre-tax submissions audits, we can help any business operate correctly in line with MTD regulations.
Contact us today to learn more about how Making Tax Digital will impact your business.