MAKING TAX DIGITAL

WHAT IS MAKING TAX DIGITAL?

MTD is an HMRC initiative designed to make sure the UK tax system is effective, efficient and easier for taxpayers. It is part of the Government’s plan to make it easier for businesses to stay on top of their day-to-day accounts. HMRC wants to be one of the most digitally advanced tax administrators in the world. RDP Accountants are MTD ready and are here to help you be ready too.

WHEN DOES IT START & HOW CAN IT HELP?

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) requires businesses and landlords with qualifying income to maintain digital records and update HMRC each quarter using compatible software.

For individuals, MTD for ITSA will be introduced in two phases:

• from April 2026, for those with qualifying income over £50,000
• from April 2027, for those with qualifying income over £30,000

This will be a big change for the sole traders who write their books up manually, after the year has finished.

We have a solution using cloud accounting software. Contact us to find out more.

Here are the governments reasons for introducing it:

Making Tax Digital (MTD) will exploit the opportunities offered by digitalisation to make it easier for everyone to get tax right. Many other countries have already done this or have digital systems in development.

Errors in handling tax affairs contribute to the tax gap — the amount of tax that is due but goes unpaid. The tax gap for Self Assessment businesses is around 18.5%, or £5 billion. Using software to keep digital records and make regular updates has been shown to reduce the potential for error and time spent making corrections, and thus support business productivity.

Digitalising our service will bring customer benefits by:

• reducing the risk of unintentional customer errors
• saving them time when they come to submit their end-of-year tax return
• supporting wider productivity and less time managing paperwork through use of digital tools
• enabling HMRC to better tailor services to customers