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Making Tax Digital: everything you need to know

What is Making Tax Digital?

Making Tax Digital (MTD) is a fundamental change to the administration of the UK tax system. It will affect how businesses and other organisations, agents and individuals maintain their accounting and tax records and how they transact and communicate with HMRC. MTD transformation projects are being run by HMRC, but should be seen as just one element of the digitalisation of business.

Who will MTD affect?

From April 2019, most VAT registered businesses with a taxable turnover above £85,000 must follow the rules for Making Tax Digital for VAT. This means they’ll need to:

  • keep digital VAT records
  • sign up for Making Tax Digital for VAT
  • use software compatible with Making Tax Digital to submit VAT Returns

MTD for income tax will be introduced from April 2021 at the earliest and apply to those who receive income from self-employment or property and will also apply to partnerships and trusts. There will be an exemption for those with an annual turnover below a threshold which has not yet been set (£10,000 was suggested during the consultation process). The threshold is likely to be applied to the total turnover from all sources of self-employment and property income.

The obligations for income tax will not start until the government makes a decision to mandate MTD for income tax.

When must you follow the rules for MTD? 

You must follow the rules for Making Tax Digital from the first VAT Return period starting on or after 1 April 2019 if the business:

  • has a taxable turnover over £85,000
  • is not part of the deferral group

A business is in the deferral group if it:

  • is part of a VAT group or VAT Division
  • is based overseas
  • is a trust
  • is a not for profit organisation that is not set up as a company
  • submits annual returns
  • is a local authority
  • is a public corporation
  • makes payments on account
  • uses the VAT GIANT service

If you or your clients are in the deferral group, you must follow the rules for Making Tax Digital from the first VAT Return period starting on or after 1 October 2019.

Timetable

The first MTD VAT Returns are not due until at least June. You should not switch yourself or your clients over to MTD VAT filing until you have submitted the business's final non-MTD VAT Return. If you are doing a VAT Return for the period 1 March to 31 May, this should be submitted in the traditional way and then the first MTD VAT Return won't be due until 7 October 2019.

You will need to wait at least five working days from the date of the business's last non-MTD VAT Return to sign up the business to MTD. But make sure you don't switch over to MTD VAT filing too late; you must do it at least 15 working days before the first MTD VAT Return submission.

Schedule of first MTD VAT Returns after April 2019

 

Monthly 
1 April to
30 April

Quarterly
1 April to
30 June

Quarterly
1 May to
31 July

Quarterly
1 June to
31 August

Submit last non MTD VAT Return
(7 days earlier if not paying by Direct Debit)

7 May

7 May

7 June

7 July

Earliest you can sign a client up for MTD via your Agent Services Account

14 May

14 May

14 June

14 July

Deadline for having client signed up and authenticated

16 May

17 July

16 Aug

13 Sept

First MTD VAT Return due
(7 days earlier if not paying by Direct Debit)

7 June

7 Aug

7 Sept

7 Oct

 

For step-by-step detailed guidance regarding setting up MTD for VAT as an agent, please click the side menu on the top right-hand side of this page. 

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