When Will Making Tax Digital (MTD) Come Into Force In The UK?
The UK government's Making Tax Digital (MTD) initiative is a significant overhaul aimed at simplifying tax processes and making them more efficient through digitalization. It is being implemented in stages, with different timelines for various types of taxes. Below is a detailed look at when each phase of MTD will come into force.
MTD for VAT
MTD for VAT is already in effect. The rollout for VAT-registered businesses with taxable turnover above the VAT threshold (currently £90,000) began in April 2019. As of April 2022, MTD became mandatory for all VAT-registered businesses, regardless of their turnover. This phase requires businesses to keep digital records and use MTD-compatible software to submit VAT returns.
MTD for Income Tax Self-Assessment (ITSA)
The implementation of MTD for Income Tax Self-Assessment (ITSA) has been delayed a few times. Initially planned for earlier, the government has now set the new date for April 2026. This phase will initially apply to self-employed individuals and landlords with an annual business or property income (turnover) exceeding £50,000. Qualifying income will be based on your 2024/25 tax return.
In April 2027, the scope of MTD for ITSA will expand to include those with income over £30,000. The government is still consulting on how best to implement MTD for those earning below £30,000, with potential future expansions to a wider group.
MTD for Corporation Tax
MTD for Corporation Tax is still in the consultation stage, and the government has not yet set a definitive date for its implementation. However, it's expected that this phase will be introduced later in the decade, with further consultations planned to refine the approach.
The Road Ahead
The goal of MTD is to make tax administration more efficient, reduce errors, and ensure that businesses and individuals can manage their tax affairs more easily. However, the phased rollout acknowledges the challenges that businesses, especially smaller ones, might face in transitioning to a fully digital tax system.
As each phase of MTD is introduced, businesses and taxpayers will need to ensure that they are using compatible software and keeping digital records. The government provides various resources and support to help with this transition, but it remains crucial for affected parties to stay informed about the latest developments.
Conclusion
Making Tax Digital represents a major shift in how taxes are administered in the UK. While the process has been gradual, with several delays, the government remains committed to fully implementing MTD across all tax types. By April 2026, a significant portion of UK taxpayers will be using digital tools to manage their income tax, with more phases to follow. Staying ahead of these changes is essential for compliance and efficiency in managing tax affairs.
For further information and updates on MTD, it's advisable to regularly check the UK Government's official MTD page and consult with a tax professional if necessary.
