MTD or Making Tax Digital was introduced by HMRC recently for VAT. However, this is part of an initiative by HMRC which has been ongoing for several years.
The purpose of MTD is to open up communications between financial records and HMRC for ease of reporting, and shortening the gaps between financial reporting between businesses and HMRC.
Many years ago, Payroll was only ever reported once a year, which was corrected on the commencement of RTI (Real Time Information), which meant that payroll figures were regularly reported to HMRC, with more detail than they used to have.
The next move was VAT, which is now virtually complete whereby all VAT Registered Businesses are required to supply information through the MTD system, which gives HMRC access to more information than would have been available when just completing the “9 boxes”.
The next step which has been confirmed for Self Assessment will require every sole trader / landlord to file quarterly to HMRC via MTD. This is currently being tested, but will become a requirement from 6 April 2024 (Originally 6 April 2023). This is a huge change for individuals, who have typically been able to keep their records in any way, ranging from full bookkeeping system through to spreadsheets through to loose receipts that they give to their accountant once a year.
Now this will all change, as quarterly reporting through an MTD portal will mean that even the smallest businesses will need to keep proper accounting records to comply with the quarterly reporting requirement.
At RSZ Accountancy, we can take the pain out of this. We have smoothly transitioned our clients over to MTD for VAT, and whilst we expect this one to be a little more complicated due to the volume of people it will impact, we will be there to help with the transition to MTD ITSA (Making Tax Digital for Income Tax and Self Assessment).
For those non-VAT Registered Limited Companies, don’t think you’ve escaped. Currently HMRC are planning the roadmap for MTD CT which is likely to be trialled in the next few years, and early indications show this will be introduced in 2026.