Overview of Making Tax Digital
Updated 19 March 2020
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This publication is available at https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital
Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.
HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world. Making Tax Digital is making fundamental changes to the way the tax system works – transforming tax administration so that it is:
- more effective
- more efficient
- easier for taxpayers to get their tax right
Review and research
The government has published a comprehensive evaluation of the introduction of the Making Tax Digital programme.
We have also published a number of research reports commissioned by HMRC to explore a wide range of subjects relating to Making Tax Digital:
- Exploring views of business reporting errors to support Making Tax Digital upstream compliance
- Exploring business Income Tax errors and how these can be addressed within software design
- Monitoring business’ awareness of Making Tax Digital
- Monitoring agents’ awareness of Making Tax Digital
- Making Tax Digital: letter testing
- Making Tax Digital: late submission penalty models
- Exploring complex businesses’ tax processes and readiness for Making Tax Digital
- Evaluating Making Tax Digital’s impact on record keeping behaviour and scope for error among small businesses
Making Tax Digital for VAT
The vast majority of VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) are now required to follow the Making Tax Digital rules by keeping digital records and using software to submit their VAT returns.
Follow the step-by-step guides
If you’re an agent signing up clients, follow the step by step guide for agents.
If you’re signing up your own business, follow the step by step guide for businesses.
Making Tax Digital for Income Tax
Some businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot to test and develop the Making Tax Digital service for Income Tax. If you are a self-employed business or landlord you can voluntarily use software to keep business records digitally and send Income Tax updates to HMRC instead of filing a Self Assessment tax return.
Helping businesses, self-employed people and landlords get it right first time
The majority of customers want to get their tax right but the latest tax gap figures show that too many find this hard, with avoidable mistakes costing the Exchequer over £9 billion a year. The improved accuracy that digital records provide, along with the help built into many software products and the fact that information is sent directly to HMRC from the digital records, avoiding transposition errors, will reduce the amount of tax lost to these avoidable errors.
We have consulted with stakeholders throughout the development of Making Tax Digital, both formally and informally.
Having listened to concerns about the pace of change, particularly for small businesses, the government announced in July 2017 that the pace of mandation would be slowed and that Making Tax Digital will not be mandated for taxes other than VAT until at least April 2020.
The government further announced in March 2019 that they would focus on supporting businesses to transition, and will therefore not be mandating Making Tax Digital for any new taxes or businesses in 2020.
The primary legislation for Making Tax Digital relating to VAT and Income Tax is contained in the Finance (No.2) Act 2017, providing certainty about the broad framework in which Making Tax Digital will operate, with secondary legislation for VAT laid in February 2018, coming into force from April 2019.
We’ve published a VAT Notice which explains the rules for Making Tax Digital for VAT and about the digital information that must be kept.
We have also published a communication pack which supports our partnership working arrangements with stakeholders, who can use the contents to inform their own communications activity and key messages for their clients, customers or members.
Help and support
HMRC provides a wide range of digital services and support for businesses and the self-employed.