Making Tax Digital Deadlines

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As the next phase of Making Tax Digital (MTD) approaches, businesses need to make sure they’re clear on the Making Tax Digital deadlines. Here’s a summary of key dates to bear in mind.

When did Making Tax Digital start?

From April 2019, businesses with a VAT taxable turnover above £85,000 were obliged to start following MTD for VAT rules.

There was a brief soft landing period where businesses could continue to copy and paste their data without digital linking. This ended in April 2021.

The MTD phase 2 deadline is fast approaching, which means that all VAT registered businesses must comply with MTD from April 2022, unless they are exempt.

When do I need to register for Making Tax Digital for VAT?

  • Making Tax Digital deadlines for VAT are the same as standard VAT returns, so you don’t have to change the dates that you usually file and pay your taxes.
  • This means businesses will need to file their first MTD return for the VAT quarter starting on or after 1 April 2022. But remember, businesses cannot sign up to MTD for VAT until after they have filed their last standard VAT return.
  • If you pay by direct debit, HMRC states that you should not sign up until 5 working days after the deadline of your last non-MTD return or at least 7 days before your return is due.
  • Your first MTD return cannot be filed earlier than 7 working days before its deadline.
  • Businesses paying via other methods must wait for 24 hours after their last non-MTD return has been submitted to sign up. They cannot file their first MTD return until 72 hours after the signup process. You should also ensure that you sign up at least 3 days before your return is due.
  • Whether or not your business is registered for VAT, if you are a sole trader or landlord with an annual turnover above £10,000, you will need to sign up to MTD for Income Tax (ITSA) when it launches in April 2024.

When is the Making Tax Digital for Income Tax (ITSA) deadline?

For sole traders and landlords with business or property income above £10,000, MTD for ITSA is due to be introduced in the tax year beginning April 2024.

General partnerships with income above £10,000 will follow in the tax year beginning April 2025.

Why was the MTD for ITSA deadline delayed?

MTD for Income Tax was delayed to give businesses and HMRC more time to prepare in light of the pandemic. You can read the full statement here.

Although the deadline has been delayed, you may still be able to sign up to the MTD for ITSA pilot via your accountancy software provider.

Signing up to the MTD for ITSA pilot will give you more time to get familiar with digital record keeping, quarterly reporting and accounting software.

Has the new MTD penalty points system been delayed?

From January 2023, HMRC is moving to a points-based system so that MTD for VAT penalties are only given to those who regularly make mistakes and miss deadlines. Points are calculated based on how regularly you submit.

You can find more information about penalties here.

The penalty points system will come into effect from April 2024 for MTD for ITSA.

Making Tax Digital Roadmap

DatePhaseWhat you need to doLive
April 2019MTD for VATVAT registered businesses with a taxable turnover above £85,000 need to use MTD-compatible software to: keep digital recordssubmit VAT returns to HMRCYes
April 2022MTD for VATAll VAT registered businesses must sign up to MTD for VAT, regardless of turnover, unless they are exempt. They must follow the rules outlined above. 
April 2024MTD for ITSASelf employed people and landlords with a total income above £10,000 must start using MTD-compatible software to: keep digital recordssubmit income tax returns 
April 2025MTD ITSA (general partnerships)General partnerships must now start following the MTD rules for ITSA, as outlined in the column above. 
From April 2026 at the earliestMTD for Corporation TaxBusinesses that pay corporation tax will need to start following MTD rules. For now, this date is unconfirmed. 

How Xero can help you prepare for Making Tax Digital

With Xero, you can submit VAT returns online to comply with MTD for VAT. Xero will automatically generate your VAT return from your bookkeeping so the process is quick, easy and streamlined. Our product features also include guidance checks and prompts in-product to increase efficiency.

If you’re not yet a Xero partner, visit our Xero Partner Programme page where you can find out more about becoming a partner. Help your clients to breeze through MTD for VAT and explore Xero’s resource hub covering everything you need to know about Making Tax Digital.

This content is brought to you by Xero.

Xero offers a cloud-based accounting software platform for small and medium-sized businesses..

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