To date, the initiative has prompted a landmark change to the way in which many businesses record and report tax, and a wider shift towards the use of Apps, cloud accounting software and online tools.
The roll-out of the MTD initiative started with VAT, back in April 2019, when all VAT-registered businesses with turnover exceeding £85,000 were required to keep digital records and make quarterly submissions to HMRC, using MTD-compliant software.
Since then, the scope of MTDfV has been extended to include all VAT-registered businesses.
A points-based penalty system will see non-compliant businesses accrue points for each late submission, or payment, with points ultimately culminating in monetary fines.
Following a two-year deferral, the implementation date for the first phase of MTD for Income Tax Self-Assessment (MTD for ITSA) is April 2026.
April 2026 – MTD for ITSA will apply to all sole traders, freelancers and landlords, with property and/or business income of more than £50,000. Those within scope of the legislation must keep digital records, submit quarterly updates on their income and expenditure to HMRC, and submit an end of year declaration in place of the usual Self-Assessment tax return, using MTD-compatible software.
April 2027 – Those with an income of between £30,000 and £50,000 will be required to comply with MTD for ITSA.
April 2028 – Those with qualifying income in excess of £20,000 will be required to comply with MTD for ITSA.
The Government intends to continue reviewing the MTD initiative and potential solutions for those with qualifying income below the £20,000 threshold.
The MTD initiative was expected to encompass Corporation Tax by 2026 at the earliest, but this is currently off the table with no indication of when it may be launched instead.
Streamlining your accounting and bookkeeping
Whilst a move towards cloud accounting and streamlined bookkeeping processes can be invaluable from a compliance perspective, given HMRC’s drive to digitalise the UK tax system the benefits stretch way beyond this for most businesses.
We have a team of dedicated experts who are using the latest digital tools and market-leading cloud accounting software to support clients, day in and day out, giving them back valuable time, access to better quality management and performance data, and delivering on our commitment to a collaborative partnership.
Read more about the bookkeeping and cloud advisory services we offer to businesses in Bedfordshire, Hertfordshire, Cambridgeshire and nationwide, or contact us to discuss how we could support you.
