What does HMRC’s Making Tax Digital Scheme mean for you?
Making Tax Digital is HMRC’s initiative to modernise the UK tax system by transitioning to digital record-keeping and reporting.
Since its announcement in February 2024, MTD has undergone various consultations and updates.
This is the largest single change to the tax system for many years and unsurprisingly, we have received many questions about it. So, we’ve consolidated the most up to date information to shed more light upon how Making Tax Digital may affect you.
What is Making Tax Digital?
Making Tax Digital, or MTD, aims to provide taxpayers with a comprehensive view of their tax affairs in once place. By integrating information from various sources, such as banks and employers, HMRC intends to enhance the accuracy and promptness of tax reporting.
The overall goal is to reduce errors and late submissions, ultimately improving compliance and streamlining tax processes.
Implementation of this scheme has already started, with MTD for VAT launching in 2017 and more recently, every taxpayer and individual business owner was provided with access to an online account that they could use to check their records and update their details with HMRC.
So, what’s next?
Individuals:
For individuals, MTD will combine HMRC’s separate systems into one, allowing you to view all of your tax affairs and liabilities in a single place. Information will be collected and processed in real time, so you won’t have to wait until the end of the tax year to understand your tax obligations. HMRC anticipates that this integration will eventually eliminate the need for over 10 million individual taxpayers to file Self-Assessment tax returns.
Businesses:
Businesses, including landlords and self-employed individuals, will be required to maintain digital records and submit quarterly updates to HMRC using compatible software. This approach aims to provide businesses with a clearer understanding of their tax position throughout the year. While transitioning to digital bookkeeping may present challenges, especially for those not currently using such systems, software providers are collaborating with HMRC to develop use-friendly solutions.
When will these changes take place?
The implementation of MTD is scheduled in phases:
April 2026: Self-employed individuals and landlords with an annual income over £50,000 will be required to comply with MTD for Income Tax.
April 2027: The threshold lowers to include those earning over £30,000 annually.
April 2028: Further expansion is planned, and as of this date, all individuals earning over £20,000 annually will be required to comply with MTD for Income Tax.
Businesses and individuals with turnovers under £30,000 are currently exempt from these requirements by may choose to opt in voluntarily.
What does this mean for the future?
Bringing in Making Tax Digital means a huge shift in the way tax is managed. While there may be initial challenges, the long-term benefits include more accurate record-keeping and a clearer understanding of tax liabilities. HMRC is expected to continue refining the system based on user feedback, aiming to make tax reporting more straightforward and efficient.
The Whyfield team have been hard at work, keeping up to date on how Making Tax Digital will affect you. Keep an eye on our blog page and socials (linked below) for further updates as we continue to share insights, key dates, and everything you need to know.
Give us a call on 01872 267 267, email us contact@whyfield.co.uk, or message us on WhatsApp 0777 49 39 111
Get notified of our latest blog posts, along with lots of other good stuff, over on our socials: