The programme will be extended to all businesses and then to individuals, government has announced
The government has unveiled plans for the completion of the rollout of the Making Tax Digital programme, with the scheme being incrementally extended from 2022.
As of the beginning of the 2020 fiscal year on 1 April 2019, firms with turnover in excess of the £85,000 threshold have been required to file their quarterly VAT returns via the digital platform.
From 1 April 2022, all VAT-registered companies must switch to Making Tax Digital, regardless of the value of their sales.
And, one year later, the programme will be extended to any individuals filing self-assessment income tax returns for annual business or property income in excess of £10,000.
The government claimed that providing notice of the extension of MTD such a long way in advance will give businesses and individuals – including the self-employed and private landlords – plenty of time to plan for the switch.
It will also allow software firms time to develop new products that are compatible with HMRC’s systems. This will, the government said, include “free software for businesses with the simplest tax affairs”.
There are currently 539 different MTD-registered programs that businesses can use to file VAT returns. Seventeen of these are available for free.
Financial secretary to the Treasury Jesse Norman said: “We are setting out our next steps on Making Tax Digital today, as we bring the UK’s tax system into the 21st century. Making Tax Digital will make it easier for businesses to keep on top of their tax affairs. But it also has huge potential to improve the productivity of our economy, and its resilience in times of crisis.”
There are currently 1.4 million firms signed up to the MTD programme – a figure which the government said includes 30% of the sub-£85k-turnover businesses that have not yet been mandated to do so. A total of six million VAT returns have been filed digitally by these companies.
The announcement revealing the scheme’s expansion stressed that it will not affect the amount of tax companies and individuals have to pay, but it will help reduce the “avoidable mistakes” that cost the exchequer a reported £8.5bn in the 2018/19 year.