HMRC’s MTD programme to be gradually extended

At present, businesses above the VAT threshold of £85,000 are covered by the system, which requires them to keep digital records and provide VAT returns through software. Since it was introduced in 2019, more than 1.4 million businesses have joined the programme, submitting over 6 million returns. 

As announced by the government, from April 2022, the programme will be extended to all VAT registered businesses with turnover below the VAT threshold (£85,000), and from April 2023, it will apply to taxpayers who file income tax self-assessment tax returns for business or property income over £10,000 annually. 

"We are setting out our next steps on Making Tax Digital today, as we bring the UK’s tax system into the 21st century," said Financial Secretary to the Treasury Jesse Norman.

"Making Tax Digital will make it easier for businesses to keep on top of their tax affairs. But it also has huge potential to improve the productivity of our economy, and its resilience in times of crisis."

According to the government, Making Tax Digital changes will affect the way that taxes are reported, not the level of tax that is collected. It will also help to minimise avoidable mistakes – which cost the Exchequer £8.5 billion in 2018-19.

The government explained that the long lead-in time will allow businesses, landlords and agents time to plan. It also gives software providers enough notice to bring a range of new products to market, including free software for businesses with the simplest tax affairs.

HMRC's data suggests that 30 per cent of smaller VAT-registered businesses, who are not yet required to use Making Tax Digital, have chosen to do so voluntarily because of the wider benefits the digital tools offer, including fewer errors and increased productivity.