Making Tax Digital (or MTD) is a government initiative first announced in 2015 and is designed to simplify the way businesses report their financials to HMRC.
- No more self assessment tax returns
- Records must be kept digitally
- Real time tax position available online
- Quarterly summary report
- Must be submitted through accounting software
- Sole traders, partnerships and landlords with a turnover above the VAT threshold (£85,000) will be the first to join the scheme
Originally meant to roll out in April 2018 the government have extended the timescale so that quarterly filing won’t start until after 2020 and only VAT registered businesses will have to keep digital records from April 2019.
Currently only covering sole traders and partnerships, it is expected in time to cover limited companies too. Sole trader or partnership income must be in excess of £10,000 per year. This means it affects hundreds of thousands of small businesses.
A summary report will need to be submitted from your accounting software each quarter. It will give a breakdown of your income and expenditure by category e.g. travel, advertising etc. Reports can be made more often than quarterly if you wish.
Following the year end date an End of Year declaration will be made within 9 months from the year end.
VAT registered businesses can combine their VAT and summary figures in one submission.