Overview of Making Tax Digital
Introduction to Making Tax Digital
Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.
HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world. Making Tax Digital is making fundamental changes to the way the tax system works – transforming tax administration so that it is:
- more effective
- more efficient
- easier for taxpayers to get their tax right
Making Tax Digital for VAT
We’ve taken a major step forward in this ambition with the introduction of Making Tax Digital for VAT.
VAT-registered businesses with a taxable turnover above the VAT threshold are now required to use the Making Tax Digital service to keep records digitally and use software to submit their VAT returns for VAT periods that started on or after 1 April 2019.
The exception to this is a small minority of VAT-registered businesses with more complex requirements. As part of planning for the VAT pilot, HMRC continued to engage with stakeholders and listen to their concerns about business readiness for Making Tax Digital. We have made the decision to delay mandation for these customers until 1 October 2019 to ensure there is sufficient time to test the service with them in the pilot before they are mandated to join – see the timeline below.
Some businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot to test and develop the Making Tax Digital service for Income Tax. If you are a self-employed business or landlord you can voluntarily use software to keep business records digitally and send Income Tax updates to HMRC instead of filing a Self Assessment tax return.
Helping businesses, self-employed people and landlords get it right first time
The majority of customers want to get their tax right but the latest tax gap figures show that too many find this hard, with avoidable mistakes costing the Exchequer over £9 billion a year. The improved accuracy that digital records provide, along with the help built into many software products and the fact that information is sent directly to HMRC from the digital records, avoiding transposition errors, will reduce the amount of tax lost to these avoidable errors.
We have consulted with stakeholders throughout the development of Making Tax Digital, both formally and informally.
Having listened to concerns about the pace of change, particularly for small businesses, the government announced in July 2017 that the pace of mandation would be slowed and that Making Tax Digital will not be mandated for taxes other than VAT until at least April 2020.
The Government further announced in March 2019 that they would focus on supporting businesses to transition, and will therefore not be mandating Making Tax Digital for any new taxes or businesses in 2020.
The primary legislation for Making Tax Digital relating to VAT and Income Tax is contained in the Finance (No.2) Act 2017, providing certainty about the broad framework in which Making Tax Digital will operate, with secondary legislation for VAT laid in February 2018, coming into force from April 2019.
We’ve published a VAT Notice which explains the rules for Making Tax Digital for VAT and about the digital information that must be kept.
We have also published a communication pack which supports our partnership working arrangements with stakeholders, who can use the contents to inform their own communications activity and key messages for their clients, customers or members.
Help and support
HMRC provides a wide range of digital services and support for businesses and the self-employed.
Smarter experience for individuals
The Personal Tax Account brings together each individual customer’s information in one online place. It allows customers to access the service from a digital device of their choice and at a time that suits them. It allows them to register for new services, update their information and see how much tax they need to pay.