The next phase of the Making Tax Digital (MTD) initiative is edging ever closer.

The initiative requires businesses and individuals to maintain digital records and submit tax returns using compatible software.

The MTD initiative began with VAT-registered businesses:

• April 2019 – MTD for VAT became mandatory for businesses with taxable turnover above the VAT threshold.
• April 2022 – The requirement extended to all VAT-registered businesses, regardless of turnover.

Upcoming changes

The Government has outlined a phased approach for implementing MTD for Income Tax Self-Assessment (ITSA):

• April 2026 – Self-employed individuals and landlords with annual business or property income over £50,000 will need to comply with MTD for ITSA.
• April 2027 – The threshold lowers to include those with income over £30,000.

Future plans indicate that individuals with income over £20,000 will eventually be required to use MTD for ITSA, with the specific timeline to be announced.

In the October 2024 Budget, the Government reaffirmed its commitment to MTD, emphasising the importance of digital transformation in the tax system.

Preparing your business

To ensure a smooth transition to MTD, consider the following steps:

• Evaluate your existing record-keeping and accounting processes to determine their compatibility with MTD requirements.
• Select MTD-compatible software that suits your business needs. HMRC provides a list of recognised software providers.
• Ensure that your staff are trained to use the new digital systems effectively.
• Keep up to date with HM Revenue & Customs (HMRC) announcements and guidelines regarding MTD to remain compliant with any changes or updates.

Our team of experts is here to provide advice and guidance on MTD and to help support you with the transition. Contact us today.