What is Making Tax Digital (MTD)?

Making Tax Digital (MTD) is a UK government initiative designed to make it easier for individuals and businesses to get their tax right.

It requires certain taxpayers to keep digital records and submit tax information to HMRC using Making Tax Digital compatible software.

What are the current Making Tax Digital requirements?

MTD for VAT

Making Tax Digital is already in place for VAT and replaces the manual submission of tax returns through the HMRC portal. From April 2020, most VAT registered businesses with a turnover above £85,000 must:

• Keep their VAT records digitally
• Use Making Tax Digital compatible software to submit their VAT returns to HMRC

The aim of this is to:

• Reduce errors caused by manual processes
• Improve the accuracy of tax submissions
• Create a more efficient and transparent tax system

For more information on how Making Tax Digital works in practice within Expert Agent, see the Making Tax Digital for VAT - User Guide.

MTD for Landlords (income tax)

What is Making Tax Digital compatible software?

Making Tax Digital compatible software is a software program, or set of software programs, products or applications, that must be able to: 

• Record and preserve digital records 
• Provide to HMRC information and returns from data held in those digital records by using the API platform
• Receive information from HMRC via the API platform 

Is Expert Agent Making Tax Digital compatible?

Expert Agent doesn't hold all the information for filling in a VAT return so it cannot be HMRC making tax digital compatible on its own.  

However, Expert Agent does record and preserve digital records so when used alongside other programs, it is still a component of HMRC compatible software.  

To find out which accounting software is compatible and can link to the HMRC API, visit https://www.gov.uk/guidance/software-for-sending-income-tax-updates.

Related articles:

Making Tax Digital for VAT - User Guide