Overview of Making Tax Digital
Updated 12 November 2020
© Crown copyright 2020
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gov.uk.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
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:
- Impact of Making Tax Digital for VAT
- 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
- Exploring the costs and benefits of Making Tax Digital for VAT experienced by smaller businesses
- Exploring voluntary sign-up to Making Tax Digital for VAT
- Making Tax Digital: Exploring the barriers and enablers to becoming compliant
Making Tax Digital for VAT
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.
If you are below the VAT threshold you can voluntarily join the Making Tax Digital service now.
VAT-registered businesses with a taxable turnover below £85,000 will be required to follow Making Tax digital rules for their first return starting on or after April 2022.
Follow these 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, find out about VAT records for Making Tax Digital.
Making Tax Digital for Income Tax
Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for Making Tax Digital for Income Tax from 6 April 2024.
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.
Making Tax Digital for Corporation Tax
The government has published a consultation on the future design of Making Tax Digital for Corporation Tax and welcomes views from companies and other organisations within the charge to Corporation Tax, agents, professional bodies and software developers.
The government will provide businesses with an opportunity to take part in a pilot for Making Tax Digital for Corporation Tax and will not mandate its usage before 2026.
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 £8.5 billion in 2018 to 2019. 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.
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, which came 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.