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Making tax digital for VAT

Understanding MTD

Making Tax Digital (MTD) is the government’s initiative to implement a fully digital tax system in the UK. In this system, taxpayers keep digital records and use MTD-compatible software to make tax submissions electronically.

HMRC can collect and process information that affects taxes in real-time. This means you won’t have to wait until the end of the year to find out how much tax you need to pay. This creates an opportunity for business owners to improve their record keeping, better understand their ongoing tax situation and make it easier for businesses and individuals to get their taxes right. MTD will also help reduce the amount of tax lost to avoidable errors as records are being sent directly to HMRC and the improved accuracy of digital records being kept.

Churchill Knight & Associates Ltd - Information - Making Tax Digital MTD - 1400 x 980 - 4

Making Tax Digital for VAT

MTD for VAT was introduced in April 2022. If you have a VAT-registered business, you are required to keep digital records, use MTD-compatible software to submit updates every quarter, and electronically submit your VAT return.

How to register for MTD for VAT?

You do not need to do anything. HMRC will automatically register all new VAT-registered businesses to MTD for VAT unless they are already exempt or have applied for exemption.

Are there any exemptions?

There are exemptions, and you do not need to follow the rules for MTD for VAT if HMRC is satisfied that:

  • You (or your business) are subject to an insolvency procedure
  • It’s not practical for you to submit your VAT returns or store your business records digitally – due to reasons such as location, age, disability
  • You’re already exempt from filing VAT returns online
  • Your business is run entirely by practicing members of a religious order or society whose beliefs are incompatible with keeping electronic records or using electronic communications

Electronic data

You are required to keep a digital record of:

  • Your business name
  • Your VAT registration number
  • The address of your principal place of business
  • Any VAT accounting schemes that you use

For each supply you make, you must record the:

  • Time of supply – the tax point
  • Value of the supply – the net value excluding VAT
  • Rate of VAT charged

For each supply you receive, you must record the following:

  • Time of supply (tax point)
  • Value of the supply
  • Amount of input tax that you’ll claim

Please note that supplies that do not go on the VAT return do not need to be recorded.

Making Tax Digital for Income Tax

Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) requires businesses and landlords with qualifying income to maintain digital records and to provide digital quarterly updates to HMRC. MTD for ITSA will be introduced in two phases:

  • From April 2026 for those with qualifying annual business or property income of more than £50,000.
  • From April 2027, for those with qualifying annual business or property income of more than £30,000.

When the legislation is introduced, you must keep digital records, provide quarterly updates to HMRC digitally, and submit your ITSA return information to HMRC through MTD-compatible software.

Churchill Knight & Associates Ltd - Information - Making Tax Digital MTD - 1400 x 980 - 2
Churchill Knight & Associates Ltd - Information - Making Tax Digital MTD - 1400 x 980 - 1

Contact us for a free consultation

Managing your tax affairs effectively is essential in the digital age, regardless of whether you’re an SME, a director of a limited company, or a sole trader. Churchill Knight & Associates Ltd’s accountancy software is equipped to handle all clients’ VAT record keeping and reporting to ensure your tax affairs are kept up to date and in line with MTD legislation.

To learn more about our accountancy service or to arrange a consultation to discuss your accountancy requirements, please call our expert Sales Consultants on 01707 871622. Alternatively, you can schedule a consultation for a time that suits you, and a team member will be in touch to discuss the service and answer any questions you may have.

Need help with your self-assessment tax return?

Our dedicated self-assessment tax department processes thousands of tax returns for UK taxpayers every year. If you need to submit a self-assessment, contact us today for a competitive quotation or call our friendly sales team on 01707 871622.

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