Making Tax Digital explained

On 7 August 2019, the first group of quarterly VAT filers had to submit their first return under Making Tax Digital (MTD).

Businesses with turnover above the VAT threshold are now required to keep their records digitally and send their VAT returns to HMRC directly. 

More than 1.2 million businesses have now signed up and more than 1.7 million VAT returns have been successfully submitted through the service to date. This represents a significant milestone in the digitisation of the UK’s tax service.

In addition, around one million VAT registered businesses with a turnover below the VAT threshold, and who are not required to use the service, have chosen to do so. 

If you are a self-employed business or landlord you can also voluntarily use the software to keep business records and send Income Tax updates instead of filing a Self Assessment tax return. 

Before you sign up to Making Tax Digital for VAT you’ll need either:

  • A compatible software package that allows you to keep digital records and submit VAT Returns
  • Bridging software to connect non-compatible software (like spreadsheets) to HMRC systems
  • Commercial software products recognised and listed by HMRC which can be used to submit online.

The majority of customers want to get their tax right but many find this hard, with avoidable mistakes costing the Exchequer over £9bn a year. The improved accuracy that digital records provide and the fact that information is sent directly to HMRC, avoiding transposition errors, will reduce the amount of tax lost to these avoidable errors.

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