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What is Making Tax Digital?

Making Tax Digital is the government’s initiative to implement a fully digital tax system in the UK. The first stage of Making Tax Digital, MTD for VAT, was introduced in 2019. It requires owners of VAT-registered businesses with VATable sales above the VAT threshold (currently £85,000) to keep digital records and use MTD-compatible software to submit their VAT returns electronically.

In April 2022, these rules will be extended to include all VAT-registered businesses. Even if these businesses already use accounting software to file VAT digitally, they will need to change the way they submit their tax return to HMRC.

MTD for Income Tax Self Assessment (MTD for ITSA), also referred to as ‘MTD for Income Tax’, will replace the current system of annual Self Assessment tax returns. MTD for ITSA will come into effect in April 2024 for self-employed business owners and landlords, and in April 2025 for partnerships with individual partners. Our MTD for ITSA interactive tool can tell you whether the rules will apply to you and when your submissions will be due.

MTD for VAT: what do you need to do?

FreeAgent’s MTD-compatible accounting software allows you to submit MTD VAT returns directly to HMRC. Just follow these simple steps:

Sign up to FreeAgent
Register for Making Tax Digital for VAT on HMRC’s website
Get your business’s accounts ready to file
Connect your FreeAgent account to HMRC’s Making Tax Digital service
File your business’s first MTD VAT return

Registering for HMRC’s new Making Tax Digital service can take up to seven working days to complete so we recommend that you get going as soon as you can.

How to get your business set up for Making Tax Digital for VAT

Discover how easy it really is to file MTD VAT returns directly to HMRC through FreeAgent in this short video.

When's it happening?

Check the timeline to find out when Making Tax Digital will affect you.

April 2021

All VAT returns submitted through accounting software must be sent via the software’s MTD connection.

April 2022

VAT-registered businesses with VATable sales below £85,000 must follow MTD rules.

April 2024

HMRC will introduce MTD for Income Tax Self Assessment (MTD for ITSA) for self-employed business owners and landlords.

2025

HMRC will introduce MTD for Income Tax Self Assessment for partnerships with individual partners.

2026 onwards

HMRC will seek to introduce MTD for Corporation Tax.

How FreeAgent can help

FreeAgent’s powerful automation features can help you get your accounts in order for digital VAT filing with minimal hassle. Our Open Banking bank feeds automatically backfill your account with historical bank transactions, saving you time as you prepare to file your first digital VAT return.

Once you’ve set up for digital VAT filing and your accounts are in order, FreeAgent will automatically generate your MTD VAT return and allow you to submit it directly to HMRC with the click of a button.

What does Making Tax Digital mean for you?

MTD for small businesses

Making Tax Digital: what does it mean for you?

Read our overview of the MTD initiative and discover how it will affect your business.

Making Tax Digital: 8 common myths busted

Sort the fact from the fiction as we clear up eight of the most common myths about MTD

Your Making Tax Digital for VAT questions answered

All the answers to your most pressing questions on MTD for VAT.

Preparing for MTD for VAT in FreeAgent

Make the transition to MTD as pain-free as possible by following these steps to prepare your accounts.

MTD for VAT penalties

Find out what penalties you might face if you fail to comply with the new legislation.

A guide to Making Tax Digital for Income Tax Self Assessment

Learn what's changing under MTD for ITSA and find out what the new rules mean for you.

Making Tax Digital jargon buster

Find out what some of the words and phrases from the MTD lexicon really mean.

Making Tax Digital on the FreeAgent blog

Follow the latest MTD news on our blog for small businesses and freelancers.

MTD for accountants

Free MTD consultation

Take a free 30‑minute consultation with an MTD expert.

MTD Express pack

Everything you need to get your clients sorted for MTD for VAT in double-quick time.

Guide your clients through Making Tax Digital

Introduce your small business clients to MTD with this free handout.

How to get set up for MTD for VAT

Find out all the steps you need to take to get your practice and clients ready for MTD for VAT.

Client segmentation spreadsheet for MTD for VAT

Looking to organise your clients for MTD for VAT? This handy spreadsheet template can help you to prepare.

MTD for ITSA: 10 myths busted

We dispel some of the myths that currently surround the initiative.

MTD for ITSA: how to prepare your landlord clients

Watch this recording to discover how MTD for ITSA will affect your landlord clients and how you can prepare them ahead of its introduction in April 2024.