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Do I need to register for Making Tax Digital?

August 26, 2022
Making Tax Digital (MTD) for VAT officially underway, and with Making Tax Digital for Income Tax Self Assessment (ITSA) and Corporation Tax in the pipeline, the MTD scope is only set to broaden.With plans to expand within the next 5 years, you might be wondering if you need to register your business, and if so, when?To make sure you're ready for MTD, we’ve outlined everything you need to know about MTD registration criteria, registration deadlines and a step-by-step on how to register your business for MTD.

Do I need to register for Making Tax Digital for VAT?

After the launch of Making Tax Digital Phase 2, as of April 2022 all VAT-registered business owners are now legally required to follow MTD for VAT rules.
Making Tax Digital is a government initiative designed to digitalise the way tax data is stored and submitted to HM Revenue and Customs (HMRC). Under this scheme, all MTD-registered businesses must keep digital records and submit their tax returns using MTD-compliant software.

Rolled out in April 2019, the first phase of MTD for VAT — and the first phase of MTD altogether — stated all VAT-registered business owners with a taxable turnover above the £85,000 VAT registration threshold were to register for MTD.

Making Tax Digital Phase 2 means all VAT-registered business owners must now comply with MTD rules, broadening the scope to encompass business owners who registered their businesses on a voluntary basis and are earning below the VAT threshold.

When do I need to register for Making Tax Digital for VAT?

If you’re already a VAT-registered business owner, you’ll need to register for MTD VAT as soon as possible. Unless you’re exempt, paper filings are no longer accepted by HMRC, meaning any submissions that aren’t made through MTD-compatible software will be rejected.
However, if you’re approaching the VAT registration threshold or are thinking of registering your business for VAT voluntarily, when you register will depend on how you plan to pay your VAT bill.

If you plan to pay by Direct Debit, register at least 7 days before when your next return is due, or 5 days after your return is due. If you aren’t paying by Direct Debit, you’ll need to sign up at least 3 days before your return is due.Avoid signing up within these time brackets, as registering too close to the payment deadline could mean you end up paying your VAT bill twice.As for storing digital VAT records, you’ll need to start your electronic record-keeping from the start of your first Making Tax Digital accounting period.In the table below, you’ll get a clearer picture of when to register for MTD for VAT, when to submit your VAT Return and when your first MTD accounting period is based your last VAT accounting period prior to signing up to Making Tax Digital.
Your last VAT accounting period before signing up to Making Tax DigitalSubmit your VAT Return betweenDo not sign up to MTD betweenSign up to MTD fromYour first MTD accounting period
1 Jan to 31 March 20221 April to 7 May 202228 April to 7 May 20228 May 20221 April to 30 June 2022
1 Feb to 30 April 20221 May to 7 June 202231 May to 7 June 20228 June 20221 May to 31 July 2022
1 March to 31 May 20221 June to 7 July 202229 June to 7 July 20228 July 20221 June to 31 August 2022
1 March to 31 March (monthly submissions)1 April to 7 May 202228 April to 7 May 20228 May 20221 April to 30 April 2022
A period of 12 months starting on or after 1 April 2021 and before 1 April 2022 (annual submissions starting on the first day of a calendar month)2 months after the last day of your accounting periodThe 7 working days before your Making Tax Digital VAT Return needs to be submittedThe day after your VAT Return due date until 7 working days before your next VAT Return due date (almost a full year)A period of 12 months starting on or after 1 April 2022
Source: gov.uk

How to register for Making Tax Digital for VAT

To register for MTD for VAT, you’ll need to follow these steps:

Sign up for MTD-compatible software

Without MTD-compatible accounting software or bridging software, you won’t be able to transfer your tax data over to HMRC.

Since this is one of the first questions you’ll be asked during the MTD registration process, make sure you have MTD-compatible software in place beforehand.If you’re not sure which software is the best for your small business, we wrote a guide outlining your MTD-compatible software options — but to save you from scrolling, we’ll tell you now that Ember is MTD for VAT approved.

Tell HMRC how you’ll store your VAT records

This is where you state whether you’ll be using accounting software or a combination of spreadsheets and bridging software. If you’re an Ember user, you’ll need to select the “accounting software” option.

Enter details about your business

Once you’ve completed the above, you’ll then be asked to log into your Government Gateway account, where you’ll need to tell HMRC:
Once you’ve completed the above, you’ll then be asked to review and confirm your answers before submitting your final application.

Can I be exempt from Making Tax Digital for VAT?

While MTD is compulsory for all VAT-registered business owners, you can apply to be exempt for the scheme.
Before making an application, check that you’re not already exempt. HMRC will consider you exempt if:
    You’re already exempt from filing VAT Returns onlineYou or your business are subject to an insolvency procedure
If neither of the above apply to you, you’ll still be able to apply for exemption if you can prove that it’s not reasonable or practical for you to use computers, software or the internet.This could be due to:
    You age, a disability you have or where you liveYou don’t use computers on religious groundsAny other reason why it’s not reasonable or practical
To apply for exemption, you’ll need to call or write to HMRC, with the following information close to hand:

Your business name and address Details around how you currently file your VAT Returns Why you think you fit the exemption criteria
HMRC considers each application on a case by case basis, and once a verdict is reached will send a letter with their final decision. Until then, you’ll need to continue filing your VAT submissions the way that you usually do.

Do I need to register for Making Tax Digital for Income Tax?

From 6th April 2024, if you’re registered for Income Tax Self Assessment and have a qualifying income above £10,000, you’ll need to use MTD-compatible software to:

    Keep digital accounting records of your business income and expenditureSend quarterly updates of your business income and expenses to HMRCFinalise your business income and submit your final declaration
Your qualifying income is your total income in a tax year from self-employment and property before expenses are deducted. You can report other sources of income, such as wages from employment or interest on savings, through MTD-compatible software, but keep in mind these won’t contribute towards your qualifying income.If you’re earnings are from a combination of self-employment and rental income, you’ll need to work out your gross income to see if you need to sign up to Making Tax Digital for Income Tax (MTD for ITSA).For example, if you’ve made £5,000 from rental income and £7,000 from self-employment in a tax year, your total qualifying income will be £12,000 — meaning you’ll need to register for MTD for ITSA.

Can I be exempt from registering for MTD for ITSA?

You won’t need to register for MTD for ITSA if your qualifying income is below £10,000 or if your income comes under one of these ineligible categories:
    TrustsEstatesTrustees of registered pension schemesNon-resident companies

How to register for Making Tax Digital for ITSA

Since the scheme doesn’t come into effect until 6th April 2024, you won’t need to follow MTD for ITSA rules until then. However, to get ahead of the curve, you can voluntarily register at GOV.UK.

Before you begin the registration process, you’ll need to be registered to file Self Assessment tax returns, and have a software that is compatible with MTD for ITSA.You’ll also need the following information close to hand:
    Your business name (or your name if you're a sole trader and trade under your name) Your business start date or the date you started collecting property income Email address National Insurance number Accounting period (refer to the table above to find yours) Accounting type, such as traditional accounting or cash basis

What about Making Tax Digital for Corporate Tax?

At the time of writing, MTD for Corporation Tax is due to launch in April 2026, with a trial period proposed for April 2024.Under MTD for Corporation Tax, companies will need to:
    Maintain digital records of their total income and expenditure in a tax yearProvide quarterly updates of income and expenditure to HMRC using MTD-compatible softwareFile Corporate Tax Returns using MTD-compatible software

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