Making Tax Digital

Digitising tax compliance

Making Tax Digital (MTD) is the long-term project to modernise the UK tax system and to bring tax compliance fully into the digital age. The ultimate goal is for all regular transmissions of data between taxpayers and HMRC to be performed digitally, and where possible automatically, through accounting software.

This will take many years to achieve. HMRC needs to improve its own internal systems, and provide new digital services to taxpayers for full digitisation of the tax system to be achieved.

Under the MTD rules most businesses will be required to digitally record tax-relevant data and to use MTD-compliant software to transfer the required information directly to HMRC’s systems via an application programming interface (API).

MTD for business is being introduced tax by tax, not by business size or type. Eventually, each business will have to submit separate MTD reports for the taxes it pays to HMRC. In the future, accounting software may be able to submit VAT and income tax reports for a business simultaneously, but that capability doesn’t exist at present.

Individuals who are not in business will be encouraged (but not required) to use digital means to communicate with HMRC.

This guide concentrates on MTD for business and sets out what is known about that section of the MTD project so far.