Making Tax Digital with Sage

From April 2022, all VAT registered businesses with taxable turnover need to start using Making Tax Digital software so that they can submit tax returns digitally.  

The first phase of MTD started in April 2019, mandating that most VAT registered businesses with taxable turnover over £85,000 keep digital tax records. The next phases of MTD include: 

April 2022: MTD for VAT will be extended to all VAT registered businesses, including those below the VAT threshold. 

April 2023: MTD for Income Tax and Self-Assessment mandates unincorporated (sole traders and partnerships) businesses and landlords with income above £10,000. 

April 2026: The earliest possible date for MTD for Corporation Tax after the government announced it wouldn’t be mandated before then.

Keeping your records digitally for Making Tax Digital (MTD) purposes means that you must store a digital copy of the transactions which make up the figures on your VAT return. This needs to be kept in functional compatible software. Functional compatible software is software or a set of software programs which must: record and preserve digital records, send the data to HMRC through the API, and receive information from HMRC via the API. 

Sage is 100% compliant with MTD legislation. In fact, we’ve worked with HMRC on MTD for years to ensure our accounting products make it as easy as possible for you to stay compliant.  

Making Tax Digital was put in place to reduce tax admin for taxpayers, make it easier to submit returns, and reduce the likelihood of errors.  By complying with MTD legislation and adopting compliant software you’ll be able to easily view tax information in one place, and you’ll get total peace of mind that you’re compliant when all VAT registered businesses will need to complete their VAT returns under MTD rules in April 2022. 

With MTD-compliant software you can: 

• Reduce the amount of paperwork you have 
• Ensure VAT returns are accurate 
• Easily manage bookkeeping from one place 
• View real-time tax information when you need it 
• Keep track of funds to stay on top of business 
• Get more time back to focus on your business 

If you’re registered for VAT and your taxable turnover is above £85,000, Making Tax Digital was compulsory from April 2019. From April 2022, this will be compulsory for all businesses who are registered for VAT. This means you need to send tax returns to HMRC digitally using MTD-compliant software. 

If your taxable turnover has not gone above £85,000, you will need to comply with Making Tax Digital in April 2022. From then, the only way to opt out of Making Tax Digital is either on religious grounds (where a business is run by practising members of a religious society or order whose beliefs are incompatible with using electronic communications), if it is not reasonably practicable for you to use digital tools to submit your returns due to location (if you can’t get internet access at your home and you can’t get to another location), or if you have a disability (if you can’t use a computer, tablet, or smartphone for the amount of time it takes to keep digital records). If you believe your business is exempt, you must contact HMRC to confirm. 

Right now, only UK VAT-registered businesses are affected by MTD. However, there’s a goal for all UK businesses to comply in future. 

April 2022: MTD will apply to VAT registered businesses with taxable turnover below £85,000. 

April 2023: Self-employed businesses and landlords with property income over £10,000 will need to follow MTD Income Tax rules from their next accounting period. 

April 2026: MTD for Corporation Tax is expected to begin.