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Is Making Tax Digital Compulsory?

Making Tax Digital (MTD) is a comprehensive plan by HMRC to ensure that the self-employed and small businesses take tangible steps towards going paperless with their tax records and returns. HMRC believes that MTD will ultimately make it easier for individuals and businesses to stay on top of their tax affairs and submit their returns in a timely manner.

The principal aim of MTD is to ensure that all records relevant to your business’s tax affairs are fully digital, are readily available and that the risk of human error is reduced.

There has been some confusion regarding when and how this becomes mandatory and who will be affected.


Is MTD mandatory?


From April 2019, MTD VAT has been mandatory for all VAT-registered businesses and organisations with a taxable turnover above the VAT threshold. This start date was deferred until 1 October 2019, for businesses with more complex VAT affairs.

From April 2022 this requirement extends to all VAT-registered businesses and organisations. This will apply even if their annual turnover is below the £85,000 VAT threshold.

From April 2024, MTD will be extended to anyone who submits an income tax self-assessment return, whether they’re self-employed or have an income from property. This requirement will only apply to self-employed individuals and businesses with a turnover above £10,000.

From April 2025, this will become mandatory for general partnerships with a turnover above £10,000. General partnerships are those which are not limited liability partnerships or partnerships with a corporate or other ‘non-natural partner’.


When should I register for MTD?


You should ensure that your business is registered for MTD in line with the mandatory dates above. If you are a VAT-registered business, even if your turnover is below £85,000, you should ensure you are registered before April 2022.

If you’re self-employed but not VAT registered, then the deadlines for registrations are April 2024 and April 2025 respectively, if you run a business with a turnover above £10,000.


Who is exempt from MTD?


The current exemption for VAT-registered businesses with a turnover of less than £85,000 is shortly to come to an end. From April 2025, the only businesses that will be exempt from MTD will be those with a turnover of less than £10,000. In most instances, if you are self-employed and registered for VAT or submit a self-assessment form you will not be exempt from MTD.


Can I opt-out of MTD?


Currently, businesses that are registered for VAT but have a turnover of less than £85,000 can opt-out of MTD. This option will come to an end in April 2022. As things currently stand, by April 2025, there will only be opt-outs available for businesses and self-employed individuals with a turnover of less than £10,000.


Venn make it easy to become MTD compliant


At Venn Accounts, we’re chartered accountants who specialise in cloud accounting services for small businesses and start-ups, applying modern methods to traditional accounting values. This makes us well placed to ensure that your business becomes MTD compliant with the minimum of stress.

Our cloud-based, fully digital Statutory Accounts service can save you time, resources and money, while giving you confidence that you’re fully compliant with any HMRC changes. Our Micro-Entity Accounts services make it easy for small private limited companies to become MTD compliant.

If you have any questions about MTD and ensuring your tax affairs are accurate, on-time and compliant, contact Venn Accounts today.

Get in touch

Operating from our London head office, Venn Accounts a traditional accounting firm. We are committed to ensuring all our clients are completely clear about what we can do for them, while fully supporting them every step of the way.

Contact us and speak to a member of our team about our annual account service.