Further announcements for Making Tax Digital

As part of the “Legislation day” announcements on 21 July, the government set out its planned roadmap for the further roll out of Making Tax Digital (MTD).  The announcement covered VAT, income tax and corporation tax.
 
MTD for VAT
From April 2022, all VAT registered businesses will need to keep VAT records in a digital form. This can be via dedicated record-keeping software, a combination of software packages or spreadsheets. Where spreadsheets are used, the software must be capable of taking the information from the spreadsheet electronically and sending it to HMRC without further manual adjustments.
 
Deadlines for sending VAT returns and making payments have not changed.
 
The information submitted to HMRC is the same as on the nine boxes of the current VAT return (these boxes may change as the UK leaves the EU). Individual transactions are not submitted to HMRC.
 
MTD for income tax
This will apply from 6 April 2023 for unincorporated businesses and landlords with total gross income above £10,000.
 
A quarterly summary of business income and expenses will need to be submitted to HMRC using MTD-compatible software.
 
The existing pilot of MTD for income tax will be extended to allow more taxpayers to test and familiarise themselves with the system.
 
The intention is that once quarterly submissions of income and expenses have been made, taxpayers will receive an estimated tax calculation to help them budget for their tax payments.
 
At the end of the year any non-business information can be added and the tax affairs finalised, this includes information about employment income, bank interest, dividends, pension contributions etc. The goal is for this to replace the self-assessment tax return.
 
More frequent reporting may also lead to more frequent payment of tax in due course, but that is not the intention at this stage.
 
More information on who is eligible and how to join the MTD for income tax pilot is available here https://www.gov.uk/guidance/sign-up-your-business-for-making-tax-digital-for-income-tax  HMRC will widen eligibility over time and the pilot will support most sole traders and landlords by April 2021.
 
MTD for corporation tax
The government has announced it will consult in the Autumn on the detail of extending MTD to companies.

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