Making Tax Digital (MTD) is a key part of the UK government’s initiative towards becoming one of the most digitally advanced tax administrations in the world. The goal is to simplify the tax process, making it easier for individuals and corporations to get their taxes right and stay in compliance which, by extension, will close the existing UK tax gap.
Additionally, MTD encourages businesses to go fully paperless as paper income and expense records will eventually no longer comply with tax rules.
The MTD initiatives requires that all tax submissions be made digitally. This can be done using MTD-compatible third-party software or, in the case of businesses who have limited technology resources, spreadsheet bridging software. You can find a list of compatible software on the HMRC website here.
In HMRC’s own words:
“The nudges and prompts that will be incorporated into the Making Tax Digital compatible software developed by third party software providers will help eliminate common errors, giving businesses greater certainty that they’ve got their tax right first time, reducing the need for unwelcome compliance interventions which are expensive and burdensome for both HMRC and its customers.”
“Reducing the huge amount of time and money lost to tax bureaucracy would free up billions for investment, upskilling and digitalisation. We’ve always said that – rolled-out in the right way – MTD could mean productivity gains over the long-term."
- FSB National Chairman Mike Cherry
Making Tax Digital (MTD) is the UK government’s initiative towards becoming one of the most digitally advanced tax administrations in the world. Its purpose is twofold: to simplify tax accounting for business and individuals which, in extension, will help close the UK’s tax gap. This initiative started in 2019 with VAT-registered businesses.
Here are some of the frequently asked questions – and answers – about what is Making Tax Digital.
The time has come but where do things stand when it comes to UK businesses and Making Tax Digital? Learn about some of the results from the Yooz survey of over 200 UK finance leaders.
There is an every-growing list of regulations associated with MTD, especially as new phases are implemented. When it comes to UK businesses and the implications of Making Tax Digital are businesses ready for Phase 2 of the initiative?