Now that the online VAT portal has closed and Making Tax Digital (MTD) has already begun its rollout, a lot of people are asking – what’s next for MTD?
Well, VAT was just the start. Over the next few years, MTD will extend to other forms of tax, so it’s important to get ahead and prepare with plenty of time to spare.
Here’s what you need to know about the future of MTD.
MTD for VAT
As mentioned, the original VAT online account portal is closed (as of 1 November), so you will no longer be able to use your existing account for monthly or quarterly VAT returns.
Any business registered for VAT with a turnover of £85,000 or more will be legally required to adhere to the new MTD rules.
If you haven’t already, you’ll need to sign up to MTD and find compatible software to file your VAT records and submit your returns. The Government website has a full list of compatible software for you to choose from.
Continuing to file your returns through unrecognised software will make you non-compliant, and you could face a charge of up to £400 for every wrong return you submit.
Also, if you file a return with errors, you’ll have to pay back any VAT that you owe, which could be up to 100%.
MTD for ITSA
The next stage of MTD will extend to income tax self-assessment (MTD for ITSA).
As of April 2024, anyone with trading or property income that exceeds £10,000 a year will have to submit their self-assessment through MTD-compatible software. This covers landlords, sole traders and partnerships.
Not only that, but you’ll have to keep your records digitally and provide quarterly updates to HMRC.
The quarterly update timeline is as follows:
|6 April – 5 July
|6 July – 5 October
|6 October – 5 January
|6 January – 5 April
The deadline to file your self-assessment and pay your tax bill will fall on midnight 31 January.
Even though MTD for ITSA won’t be a legal requirement until 2024, you can get ahead of the curb by signing up for the pilot scheme now.
You can volunteer for the pilot if the following applies to you:
- you’re a UK resident
- you’re registered for self-assessment
- your accounting periods align with the schedule
- you have submitted at least one self-assessment
- you keep digital records
- you have a self-employed income or a UK/foreign property source
- you’re up to date with your taxes.
You cannot sign up for the pilot if you are a:
- trustee, including a charitable trustee
- personal representative of someone who has died
- non-resident company
- Lloyd’s member.
Although it is still under consultation, MTD will extend to corporation tax by 2026 at the earliest. A previous consultation suggests a pilot scheme will open in 2024 once MTD for ITSA has launched.
So far, it’s proposed that all entities within the scope of corporation tax will be required to follow the MTD rules, with only a few exceptions.
Get a head start
Although MTD for VAT is well underway, it’s best to get ahead of the upcoming changes. If you’re unsure of how MTD will apply to you or if you need help setting it up, Fairman’s is happy to help.
Get in touch to discuss MTD with a member of our team today.