Definition of Making Tax Digital

Making Tax Digital is a government initiative that sets out a bold vision for a digital tax system to ‘make it easier for individuals and businesses to get tax right and keep on top of their affairs – meaning the end of the tax return for millions’.

What’s changing?

The current plans, in brief, are:

• The smallest businesses will be exempt from MTD – the “smallest businesses” will be businesses with annual turnover of less than £10,000.
• Taxpayers will send in summaries of their income and expenditure at least four times a year.
• More taxpayers will be able to use the cash basis of accounting.

When will the changes happen?

Making Tax Digital has a phased roll-out plan which started in early 2016 and is set to come into full effect from 2020. Anticipated key milestones include:

• April 2017 – Private pilot of roll-out starts.
• July – December 2017 – Digital tax accounts show taxpayers an overview of their liabilities in one place and HMRC begins a private pilot of Making Tax Digital for VAT.
• Spring 2018 – Live pilot of Making Tax Digital for VAT begins.
• April 2019 – Businesses with a turnover above the VAT threshold are required to keep digital records and submit quarterly returns for VAT purposes only through their accounting software.
• Businesses are able to voluntarily keep digital records for ‘other taxes’.
• April 2020 – HMRC looks to widen the scope of Making Tax Digital.

What will we be doing about it?

Each of our clients will be provided with accounting software.