Is there a Making Tax Digital (MTD) deadline?

Hit me – what’s the MTD deadline?

First things first, let’s start with the back story. Otherwise the rest of this guide will make no sense – and that would be a tragedy.

In April 2022, the first law around Making Tax Digital (MTD) came into effect in the UK. This was part of HMRC’s plan to get small business and self-employed workers to complete their tax records entirely online. 

If you’re a business owner or self-employed, you might be wondering how this affects you and what you need to do before the MTD deadline? Don’t worry, we’ll explain everything you need to know…

What is Making Tax Digital?

Making Tax Digital is part of HMRC’s overall plan to fully ‘digitalise’ UK Tax. 

If you run a small business or work for yourself, you might already be used to using HMRC’s online service to complete Self Assessment or to pay VAT.

But, MTD now requires all VAT-registered businesses to store their VAT accounting records digitally. This means that businesses will no longer be able to submit VAT returns using HMRC’s online service. Instead, they’ll have to use a certain type of MTD software.

Why is HMRC doing this?

The main aim is to make UK Tax completely paperless, but HMRC is switching to MTD because:

1. It’s believed that switching from paper to digital tax records will help small businesses and the self-employed ​​avoid making common mistakes. It should save you time when it comes to managing your tax affairs. And of course, we all know how costly mistakes on your tax returns can be!

2. It’ll save HMRC money. It’s estimated that the current process (including all the errors) costs HMRC approx £10 billion every year!

When is the MTD deadline?

Unfortunately, if you’re a VAT-registered business, you’ve already missed it! 

As of April 2022, MTD for VAT now applies to you, even if you’re only voluntarily registered for VAT. 

If you’re self-employed, then don’t worry, you still have time to prepare for the switch. Self Assessment taxpayers have until April 2026 for those earning over £50,000 and April 2027 for those earning between £30,000 and £50,000 for the MTD deadline for Income Tax.

I missed the MTD VAT deadline, will I be fined?

Yes, however…

…the new fines for MTD for late submissions apply from 1 January 2023. They had been due to start on 1 April 2022, but due to an IT issue, HMRC has moved the date back by nine months. 

Classic.

Under the new requirements, businesses will receive a ‘point’ every time their submission deadline date is missed (similar to speeding fines). When you’ve built up a certain number of points, you’ll pay a £200 fine.

Alongside the penalty points system, HMRC is introducing a new late payments penalty system that could see late payers being fined up to 4% of the outstanding amount daily.

If you haven’t already, make sure you register for MTD on the government website here. To avoid issues with your VAT return payments you must:

• Sign up at least three days before your VAT return due date if you don’t pay via direct debit

OR 

• If you pay via direct debit, you must not sign up less than 7 days before your first MTD Vat return due date.

Confused? TaxScouts can help!

If you’re self-employed or run a small business and are confused by the recent MTD changes, then don’t worry. Get in touch with us for some simple, one-off tax advice from one of our accredited accountants. You can learn more here.