Update on Making Tax Digital

HMRC has made no secret of it's plans to transform tax online filing and reporting which has been branded as Making Tax Digital. We discussed this some time ago in a previous post Whilst it's been subject to delays previously the final implementation date is looming. We've therefore decided to provide you with the latest update on Making Tax Digital. 

Update on Making Tax Digital

Update on Making Tax Digital - Overview

Making Tax Digital for VAT now covers all VAT registered businesses effective from April 2022. Therefore, if you're a VAT registered business you must retain digital records. You must also submit VAT returns to HMRC using 'functional compatible software'. We'd recommend you use either FreeAgent or Xero for this purpose.

Those existing VAT registered businesses, with turnover exceeding the VAT registration threshold have been within Making Tax Digital for VAT since April 2019. Once you are within in Making Tax Digital for VAT, you must remain in the system, unless you deregister for VAT.

Making Tax Digital for Self-Assessment

Under the new system, the Self Assessment tax return will be replaced by five new reporting obligations. These will be made during and after the tax year (see below). There will be quarterly updates necessary and a final declaration to HMRC for the year end.

The new start date for self-employed businesses and landlords with business turnover above £10,000, is 6 April 2024. 

The new start date applies regardless of your accounting period end date. At the same time, HMRC are proposing to change the method of assessing profits for the self-employed. We'll cover this topic at a later date when more details become available.

New tax return filing dates

If you're struggling with submitting a tax return annually, you'll be dismayed to learn that HMRC will now require 5 tax return submissions per year under Making Tax Digital. 

These quarterly returns must be submitted to HMRC with everyone complying to the quarter dates below:

  • The first quarter covers the period 6 April to 5 July
  • The second quarter covers the period 6 July to 5 October
  •  The third quarter covers the period 6 October to 5 January
  •  The fourth and final  quarter covers the period 6 January  to 5 April

An End of Period statement must be submitted for each relevant period. This will contain all the relevant information plus a declaration confirming the information is correct and complete to the best of your knowledge. 

The End of Period Statement must be filed by 31 January following the relevant tax year. This part at least is similar to the way personal Self Assessment tax returns are submitted currently.

You can elect to change your updates to calendar quarters (31 March etc) which might make life easier from an admin perspective. This election stays in place until withdrawn.

Payment of tax liabilities

Any tax liability will need to be settled by 31 January following the tax year as is the case currently. However you'll be able to voluntarily(!) pay your taxes throughout the tax year. The full details about this aren't currently available though it is envisaged that four payments on account will eventually be required. 

Making Tax Digital - Penalties

As well as changing the payment dates for tax (see above) HMRC appear to be using Making Tax Digital as an opportunity to impose a more stringent penalty regime.  The main points you need to consider are as follows:

  • There will be a points based late filing penalty system. Sadly points awarded mean penalties, not prizes!
  • Points will be deducted for compliance and timely filing and reset to zero after a period of compliance.
  •  When a points threshold is exceeded a penalty will subsequently be charged.
  • Every subsequent late submission will incur a penalty.
  • It will be possible to appeal against any penalties on the grounds of reasonable excuse. Rather ironically one of these is a failure of HMRC's systems preventing submission(!)

This new penalty regime, appears to be fiendishly complex and at odds with the government's assertion they are trying to simplify the UK tax system!  Put very simply, it provides HMRC with five times as many opportunities to charge you penalties for non-compliance! We'll also be covering this new penalty regime in far more detail at a later date.


HMRC has been distracted these last few years as a result of various Covid-19 initiatives introduced by the government. However they are now refocusing their efforts on Making Tax Digital especially given the record levels of public debt. We therefore think it's really important to start using systems compliant with Making Tax Digital, sooner, rather than later. 

For more useful information, check out our Ebooks here.

And if you'd like to know how we can help you with all of this, or with anything else, feel free to give us a call on 01202 048696 or email us at [email protected].

Alternatively, please feel free to complete our Business Questionnaire here.

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