A4.172 Making Tax Digital (MTD)
For the latest New Developments, see ND.1812, ND.1999, ND.2013.
MTD requires businesses to keep records digitally and submit tax return data directly from those records using MTD compatible software. Under MTD, a report of the business's trading or property income, allowable expenditure and claims for allowances or reliefs against such income must be submitted in relation to each tax year (property businesses) or basis period (trading businesses), and interim reports must be submitted quarterly on fixed dates. MTD for income tax will become mandatory from April 2024 (see A4.173) for the majority of businesses (see A4.174). MTD is already in use for VAT purposes for businesses with taxable turnover over the VAT registration threshold, and is to be extended to all VAT registered businesses from April 2022.
For HMRC guidance, see Making Tax Digital for Income Tax.
A penalty of up to £3,000 will apply for failure to keep records digitally if within MTD1. For penalties for late filing of quarterly returns, see A4.558.
HMRC originally advised that agents would be able to sign up taxpayers from 6 April 2022. This would not activate MTD obligations but would give agents the opportunity to spread the load of sign-up work across a longer period before MTD becomes mandatory2. It is understood that this will now have effect from April 2023 (ie 12 months before MTD becomes mandatory)3.
See A4.172A as regards how the plans for MTD have developed since it was first announced in 2015. For full details of