MTD for business overview
HMRC's vision to digitalise the UK tax system is well underway. The transformation started in April 2019 with Making Tax Digital (MTD) for VAT for businesses with taxable turnover above the VAT threshold.
Page last updated
27 July 2020
MTD for VAT started in April 2019 and will be extended to all VAT-registered businesses in April 2022. MTD for income tax (for the self-employed and those with income from property) is to be mandated from April 2023. A consultation on MTD for corporation tax is expected in 2020, but no start date has been announced. HMRC is also running an MTD for individuals transformation project.
The essential elements of MTD are:
- Businesses and organisations (which includes those with income from property) are required to maintain digital accounting records. Maintaining paper records ceases to meet the requirements of the tax legislation.
- Businesses and organisations are required to use a functional compatible software product to submit updates and returns to HMRC. The software uses HMRC’s API (Application Program Interfaces) platform to submit information to HMRC. The current HMRC online tax return services for the relevant tax are withdrawn when a business signs up to MTD.
Timeline for MTD
- From April 2019: MTD for VAT is mandatory for VAT-registered businesses and organisations (including sole traders, partnerships, limited companies, non-UK businesses registered for UK VAT, trusts and charities) with taxable turnover above the VAT threshold. There was a six-month deferral of the start date, to 1 October 2019, for some more complex businesses.
- From April 2022: MTD for VAT will be mandatory for all VAT-registered businesses and organisations.
- From April 2023: MTD for income tax will be mandatory for some self-employed and partnership businesses and for some income tax payers with income from property. It will only apply to those with business income (turnover plus gross rental income) over £10,000.
- Read more on MTD for income tax
- Read more on MTD for VAT