HMRC announces Making Tax Digital Next Steps

HMRC announces Making Tax Digital Next Steps

Alongside the Finance Bill 2020-21 draft legislation, the UK government has released various aspects of an ambitious ten-year strategy to create ‘a tax system fit for the challenges and opportunities of the 21st century’, putting significant focus on real time reporting of tax and adopting cutting edge technology in accounts and taxation processes.

Even though HMRC’s Making Tax Digital (MTD) initiative has been progressing quite slowly than originally expected, it is still moving further and will continue regardless of the ongoing pandemic and Brexit.

Since April 2019, businesses above the VAT threshold of £85,000 have been required by law to use MTD to meet their VAT obligations: setting up a digital tax account and filing quarterly returns online, using an accounting system or app that is integrated with HMRC’s digital gateway. Since it was introduced in 2019 more than 1.4 million businesses have joined the programme, submitting more than 6 million returns.

Recently, two further stages of MTD were announced. They involve VAT and income tax in 2022 and 2023 respectively. On 21 July, the Treasury set out the next steps in its plan to extend Making Tax Digital (MTD) to all businesses and those taxpayers that file self assessment returns.

From April 2022, this will be expanded to all VAT registered businesses with turnover below £85,000.

A further MTD expansion from April 2023 will cover self-employed businesses and landlords who file income tax self-assessment tax returns for business or property income over £10,000 annually.

MTD has been an opportunity for many small and medium-sized enterprises (SMEs) to become more efficient and more profitable, with support from cloud accounting systems such as Xero,Quickbooks, Sage etc.

Jesse Norman, financial secretary to the Treasury, said: “Making Tax Digital will make it easier for businesses to keep on top of their tax affairs. But it also has huge potential to improve the productivity of our economy, and its resilience in times of crisis.

Making Tax Digital changes will affect the way that taxes are reported, not the level of tax that is collected. The UK government says it will help to minimise avoidable mistakes – which cost the exchequer £8.5bn in 2018-19.

SandMartin’s robust UK taxation team has experience in helping UK Accounting firms in registration and setup for MTD for their clients. Our outsourcing team would be glad to support you.

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