Businesses urged to prepare for Making Tax Digital for VAT

Businesses urged to prepare for Making Tax Digital for VAT
Dan Martin
Dan MartinDan Martin Content & Events

Posted: Thu 13th Jan 2022

The government has reminded businesses that all those registered for VAT must comply with new Making Tax Digital rules from this April.

Since 2019, most VAT-registered taxpayers with a turnover above the VAT threshold of £85,000 have needed to keep their VAT records digitally and update HM Revenue & Customs (HMRC) through secure software. From 1 April, all VAT registered businesses, regardless of turnover, must do the same.

The requirement is part of the government's Making Tax Digital (MTD) strategy which aims to transform the tax system. The government says the changes increase business productivity, reduce mistakes and cut costs. Figures show that tax return mistakes cost the exchequer £8.5bn in 2018-19.

To sign up to Making Tax Digital for VAT, businesses, or an agent acting on a businesses’ behalf, must:

HMRC's Joanna Rowland said:

"Making Tax Digital is fundamental to the delivery of a trusted and modern tax system, making it easier for businesses to get their tax right and supporting the UK to go digital.

"By signing up for Making Tax Digital, we expect most businesses to experience long-term benefits, including reduced errors and time saved in managing their tax affairs.

"We encourage businesses to explore digital record-keeping for their VAT affairs and use this time to choose the right software to support their business needs."

The government says that as of December 2021, 1.6m taxpayers had joined Making Tax Digital for VAT with more than 11m returns had been successfully submitted. Around a third of VAT-registered businesses with taxable turnover below £85,000 have signed up to Making Tax Digital for VAT ahead it becoming mandatory on 1 April.

The Making Tax Digital for VAT changes are among several new rules and regulations businesses need to be aware of in 2022.

Following the VAT changes, income tax self assessment will also be covered by Making Tax Digital. Those changes were originally due to come into force in April 2023 but the government announced last September that because of the coronavirus pandemic, businesses and landlords with an income of over £10,000 will now be mandated to comply from April 2024. The rules will apply to general partnerships from April 2025.

Useful Making Tax Digital resources

Dan Martin
Dan MartinDan Martin Content & Events
I'm a freelance content creator and event host who helps small businesses and the organisations that support them. I'm also Enterprise Nation's Local Leader for Bristol. I have 20 years of experience as a small business journalist having interviewed hundreds of entrepreneurs from billionaires like Sir Richard Branson to the founders behind brand new start-ups. I've worked for a range of leading small business publications and support groups, most recently as head of content at Enterprise Nation where I was responsible for the prolific output of content on the company's blog and social media. I now freelance for Enterprise Nation including hosting the Small Business sessions podcast. I'm based in Bristol where I run and host regular events with the local small business community in my role as Enterprise Nation's Local Leader for Bristol. I also have strong connections with other major business organisations in the south west region. In total, I've hosted over 100 events including conferences with an audience of hundreds for international brands like Xero and Facebook and live web chats from inside 10 Downing Street. With my partner, I co-run Lifestyle District, a lifestyle blog focused on culture, art, theatre and photography.

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