Making Tax Digital (MTD) FAQs

For further insight into MTD, please see the Frequently Asked Questions below.

What is MTD?

In the words of HMRC, MTD is about ‘helping businesses to get their tax right’. Underpinning its introduction is the goal of addressing the £9bn of tax lost every year due to errors.

What are the advantages of MTD?

With the right software and reporting procedure MTD gives businesses:

  • a clear view of their tax obligations
  • access to their tax information online in one place
  • the ability to work collaboratively with advisors and agents
  • the ability to plan and budget effectively

Who does MTD apply to?

The first tax to come under the wing of MTD is VAT. All VAT registered businesses with turnover of £85,000 (the current threshold) or more will need to account for their VAT obligations digitally with VAT return periods starting on or after 1 April 2019. Exemptions are listed below.

Is MTD compulsory?

Yes, for VAT registered businesses with turnover of £85,000 (the current threshold) or more.

The only exemptions are for

  • religious societies
  • inability to use digital tools due to age, disability or remoteness
  • insolvency

When does MTD start?

The start date for VAT accounting was 1 April 2019. For a very small number of organisations MTD were deferred to 1 October 2019. These include trusts, not-for-profit organisations that are not set up as a company, VAT divisions, VAT groups, some public sector entities, local authorities, public corporations, traders based overseas, those required to make payments on account and annual accounting scheme users. These are known as ‘complex businesses’.

How do I register for MTD?

If you are a VAT registered business you need to register for MTD unless you have applied for exemption or are in the deferral group (see ‘When does Making Tax Digital start?’). NB, you will not be automatically signed up for MTD.

You will need compatible software to submit your VAT Return and a Government Gateway User ID and password (if you don’t have one, you can create one when you sign up).

Find out more about signing up for Making Tax Digital here.

Is MTD only for VAT?

From 1 April 2019 MTD is being used for VAT, except for businesses in the deferred group (see ‘When does MTD start?’) which started on 1 October 2019.

From no earlier than 2021 MTD will also be used for Corporation Tax and Income Tax.

What software do I need for MTD?

Under MTD you will need software that keeps your accounting records and can submit your VAT return to HMRC.

Will HMRC provide free software for MTD?

No. HMRC will not provide free software for MTD. Businesses are encouraged to seek the professional guidance of their accountant or bookkeeper who can help them select the right software for MTD returns. You can also review the available software on HMRC’s website.

Does MTD apply to limited companies?

Yes, as long as the company is VAT registered with a turnover of £85,000 and over (current threshold) and is not exempt from MTD (see ‘Is Making Tax Digital compulsory?).

How to keep your tax records in one place

Perrys Accountants offer clients an exclusive service for keeping all their tax return records in one place – our One Click system. This secure client portal is a way of making your record keeping more efficient and will facilitate your adoption of MTD. Caroline Hoare of Perrys explains the benefits and how One Click works in the following video.