Making Tax Digital
Digitising tax compliance
The first set of individuals is now subject to the requirements of Making Tax Digital for Income Tax Self Assessment (MTD for ITSA), the latest stage in HMRC’s project modernise the UK’s tax administration system. The aim is to facilitate more digital reporting in ‘real time’, i.e. closer to the time of transactions.
The ultimate goal is for all regular transmissions of data between taxpayers and HMRC to be performed digitally, and where possible automatically. The initial target is for 90% of taxpayer interactions with HMRC to be digital.
MTD for Value Added Tax (VAT) has been compulsory for all VAT registered businesses (except those that are digitally excluded) since April 2022 and from earlier than that for most. MTD for ITSA is being staged according to level of income with two more groups of taxpayers joining in April 2027 and 2028. VAT registered individuals must submit separate MTD reports for income tax and VAT, but some MTD software may be able to combine reports due around the same time into one submission process.
Revised penalty regimes for late filing of MTD reports, and for late payment of tax under MTD, took effect from January 2023. Daily penalties may be charged where business records are not kept in a digital medium.
