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Your guide to getting Making Tax Digital sorted

Don't miss your first MTD for VAT deadline on 7 October. Take action and get compliant with Sage Accounting. Rest assured you're fully MTD-compliant and simplify your processes with HMRC-recognised accounting software from Sage.

Working for an accountancy practice? Go here

Are you an accountant or bookkeeper? Explore MTD for accountants and bookkeepers

Making Tax Digital explained

What is Making Tax Digital?

MTD is HMRC’s plan to digitise the tax system for VAT, Income Tax Self Assessment and Corporation Tax for both businesses and individuals. Its purpose is to make tax returns simpler and more efficient for everyone. 

Watch the video to learn more.

How will Making Tax Digital impact me?

If you’re using spreadsheets, you’ll either need to use bridging software or start using HMRC-recognised software instead.

Not sure if you’re affected?  Find out here

What do I need to do now?

If you haven’t already, it’s important to take action now. Make sure you’re compliant with MTD for VAT by adopting fully compatible software, keeping digital records and signing up before the VAT deadline. Not sure on next steps? Use our handy tool to discover which actions you need to take now. 

Your deadlines for Making Tax Digital

April 2022
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MTD for VAT

VAT-registered businesses must use recognised software to keep digital records and submit VAT to HMRC.
April 2024
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MTD for Income Tax Self Assessment

MTD for Income Tax Self Assessment will apply for all self-employed business owners and landlords with annual income over £10,000.
April 2025
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MTD for Income Tax Self Assessment

MTD for Income Tax Self Assessment will apply for general partnerships with an annual turnover of over £10,000.
April 2026
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MTD for Corporation Tax

Making Tax Digital for Corporation Tax to be introduced at the earliest.

Making Tax Digital news and advice

Get articles, insights, and tips to help with your preparations for Making Tax Digital from Sage Advice, our business blog.

Basis period reform and Making Tax Digital: What businesses need to know

Basis period reform and Making Tax Digital: What businesses need to know

What's the basis period reform? Learn what sole traders and businesses need to know, covering accounting periods, overlap profits and more.

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Step by step guide to Making Tax Digital for VAT

Step by step guide to Making Tax Digital for VAT

Agents and businesses need to adhere to Making Tax Digital for VAT. Follow these steps to support clients or set up your business for MTD.

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How to register for Making Tax Digital for VAT

How to register for Making Tax Digital for VAT

Making Tax Digital applies to all VAT registered business now. Read our guide to learn how to register for MTD.

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MTD for Income Tax: What Making Tax Digital means for sole traders from 2024

MTD for Income Tax: What Making Tax Digital means for sole traders from 2024

MTD for Income Tax starts in April 2024. Learn about the requirements and rules, and discover what you have to do to get ready in time.

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Making Tax Digital for VAT checklist: How to get up to speed with MTD for VAT

Making Tax Digital for VAT checklist: How to get up to speed with MTD for VAT

Use this MTD checklist to help you get clarity on Making Tax Digital for VAT and the requirements you need to follow.

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What the HMRC Making Tax Digital for VAT emails and letters mean for your business

What the HMRC Making Tax Digital for VAT emails and letters mean for your business

Received an email or letter from HMRC about Making Tax Digital for VAT? Here's what you need to know about MTD for VAT and do now.

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VAT registration guide: When and how to register for VAT

VAT registration guide: When and how to register for VAT

Learn how to register for VAT, including when to register, registering online, the registration threshold, and voluntary registration benefits.

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Read more
Making Tax Digital thresholds: VAT, Income Tax and Corporation Tax

Making Tax Digital thresholds: VAT, Income Tax and Corporation Tax

The latest phase of Making Tax Digital started in April 2022. Get the lowdown on thresholds for MTD for VAT, Income Tax and Corporation Tax.

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Download your Making Tax Digital guide for VAT

Learn more about Making Tax Digital (MTD) for VAT, what HMRC’s new scheme means to your business and discover the steps you need to take to submit returns. 
Download my guide

MTD Podcasts

Carl Reader: How to boss Making Tax Digital
The serial entrepreneur and author of Boss It dives into the fundamentals of finance and sheds a light on Making Tax Digital.
Go to podcast

Meet MTD for VAT requirements with a Sage Accounting software plan

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Accounting

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FREE for 3 months
£12
£0.00 +VAT/mo*
You save £36.00
  • Create and send sales invoices
  • Track what you're owed
  • Automatic bank reconciliation
  • Calculate and submit VAT
  • Be Making Tax Digital Ready for VAT
  • Supports one user
Compatible with:
Most popular
Accounting

Standard

FREE for 3 months
£26
£0.00 +VAT/mo
You save £78.00
  • Create and send sales invoices
  • Track what you're owed
  • Automatic bank reconciliation
  • Calculate and submit VAT
  • Be Making Tax Digital Ready for VAT
  • Supports unlimited users
  • Manage and submit CIS
  • Run advanced reports
  • Send quotes and estimates
  • Forecast cash flow
  • Manage purchase invoices
  • Snap receipts with AutoEntry, 2 months free(2)
Compatible with:
Accounting

Plus

FREE for 3 months
£33
£0.00 +VAT/mo
You save £99.00
  • Create and send sales invoices
  • Track what you're owed
  • Automatic bank reconciliation
  • Calculate and submit VAT
  • Be Making Tax Digital Ready for VAT
  • Supports unlimited users
  • Manage and submit CIS
  • Run advanced reports
  • Send quotes and estimates
  • Forecast cash flow
  • Manage purchase invoices
  • Snap receipts with AutoEntry, 2 months free(2)
  • Multi-currency banking and invoicing
  • Manage inventory
Compatible with:
*Get 3 months free, then £12/£26/£33 + VAT/mo (tier depending). Terms and conditions apply.
(1) Starting at 5 employees from £0.00 (offer price) per month + VAT with the option to add employee tiers for up to 100 employees. RRP from £7 + VAT per month (after offer).
(2) Snap and upload data from unlimited receipts, invoices and supplier statements with AutoEntry, free for your first 2 months. Subject to fair usage policy. Standard and Plus tiers only.

Making Tax Digital FAQs

For more MTD knowledge and advice, check the FAQs below or visit our Sage Advice section on everything MTD for VAT.

It’s fast and easy to connect Sage Accounting to HMRC.  When you go to complete your VAT return in Sage Accounting you’ll have the option to authenticate with HMRC in 3 simple steps:

  • Select Reconnect and Authenticate to go to the HMRC website
  • Select Continue and enter your Government gateway User ID and Password
  • Select Grant Authority and you’ll return to Sage Accounting connected to HMRC

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.

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 

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 2024: Self-employed business owners and landlords with property income over £10,000 will need to follow MTD for Income Tax Self Assessment rules from their next accounting period. 

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

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 in April 2022. 

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.

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.  

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 keep digital records and send VAT returns to HMRC digitally using MTD-compliant software.

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 2024: MTD for Income Tax 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.

Sage is 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.
These articles and related content is the property of The Sage Group plc or its contractors or its licensors (“Sage”). Please do not copy, reproduce, modify, distribute or disburse without express consent from Sage. These articles and related content is provided as a general guidance for informational purposes only.
 
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