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Darren Wingfield

Darren Wingfield

Commercial Manager

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Making Tax Digital: A Timeline of Changes & Delays

Posted on 24/01/23  |  3 Minutes
Image from HMRC Making Tax Digigtal Campaign

The Making Tax Digital UK government initiative represents a dramatic shake-up within the world of business accounting. And thanks to the many deadline extensions and other changes that have been introduced since its conception, it’s little surprise that businesses, sole traders and landlords feel somewhat in the dark right now on all things MTD.

In this post, we’re taking you on a whirlwind tour of the various changes, delays and extensions that have affected businesses on their path to Making Tax Digital - and exploring the effects of these changes on entrepreneurs across the UK.

A quick refresh on Making Tax Digital

Making Tax Digital is part of the UK government’s Tax Administration Strategy, and seeks to digitise and drive efficiencies within the UK tax system.

In a nutshell, the initiative requires business and self-employed individuals to:

  • Adopt digital rather than physical records
  • Embrace suitable cloud accounting software
  • Submit updates on a quarterly basis, in order to work towards more of a real-time reporting structure

A timeline of MTD changes and delays

The original plan - set out by the government in December 2015 - was for businesses and sole traders to be able to make use of Making Tax Digital from the end of 2018. So, needless to say, things are running a little behind schedule.

There have been various delays and updates along the way since the idea of this initiative was first introduced, including the following key changes:

  • Mid-2017: the government announces that taxpayers are to be given more time to adapt to the Making Tax Digital initiative. It’s said that, by April 2019, businesses turning over more than £85,000 (the VAT threshold) will need to make the change to MTD for VAT. Additionally, the government states that MTD for other taxes will not be required by any business or individual until at least 2020 - nor will the quarterly reporting to HMRC
  • 2020: as the pandemic begins, further delays are signalled by the government in an attempt to ease the burden on businesses already struggling due to coronavirus. Making Tax Digital’s soft landing is extended to April 2021
  • July 2020: VAT-registered companies below the £85,000 turnover threshold that are signed up for voluntary VAT are told they’ll need to make the switch to MTD by April 2022. Landlords and sole traders turning over more than £10,000 are told to follow MTD for Income Tax rules from their first full accounting period after April 2023
  • October 2020: the government reveals that MTD for Corporation Tax will apply from no earlier than 2026
  • September 2021: Making Tax Digital for Income Tax is postponed until April 2024, having previously been expected to become law in April 2023
  • December 2022: MTD for Income Tax is postponed again. This will now be launched in two distinct phases, beginning in April 2026 for sole traders and landlords earning over £50,000 and in April 2027 for those earning over £30,000

Understanding the implications

Understandably, the various delays to the implementation of MTD have disrupted timelines for businesses and sole traders across the UK. But as deadlines are pushed further and further back, this doesn’t mean having to put your plans on ice.

The advent of Making Tax Digital means having to embrace digitised accounting once and for all - and this should be considered a welcome change, for all it presents a significant change for many businesses.

Improving your digital accounting literacy sooner rather than later is a challenge worth taking on in the months to come, as this will stand you in the best possible stead come these all-important deadlines. Investing in cloud accounting software such as Xero will bring with it numerous benefits, including making your accounting processes dramatically more efficient and reliable, while also preparing you for the MTD age.

If you’re looking to digitise your business accounting and unsure where to start, you’re in the right place. At Harlands Accountants, it’s our mission to make your accounts as efficient and hassle-free as possible. Find out how we could help you account with confidence by getting in touch now.