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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:

  1. Sign up to FreeAgent
  2. Register for Making Tax Digital for VAT on HMRC’s website
  3. Get your business’s accounts ready to file
  4. Connect your FreeAgent account to HMRC’s Making Tax Digital service
  5. 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?

Rebecca Chivers

RebeccaTFG

Thank you for making the process utterly painless 🙌🏻🙌🏻 #MTD
12:48 PM - 1 Apr 2019

Chris Blunt

@cblunt

First VAT return filed via #MTD 🎉. Thanks @freeagent for making it super easy (the new VAT report screen is great too! 👍
12:02 PM - 11 Jun 2019

Catherine Ferguson

@catherinef39

Just updated our VAT on @freeagent to #MakingTaxDigital. Easy peasy! Thank You 😊
01:10 PM - 7 Mar 2019

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