Government confirms the next steps for the digitisation of taxation

The Treasury has released new details on the next steps it intends to take as part of its long-term tax digitisation plan.

Its timeline for a modernised digital tax system will see HM Revenue & Customs’ (HMRC) Making Tax Digital (MTD) programme gradually extended over the next few years to cover most businesses. 

Under the current MTD rules, businesses above the VAT threshold of £85,000 are required to keep digital records and provide VAT returns through MTD-compliant software.

However, under the new plan, the programme will be extended to all VAT-registered businesses with turnovers below the VAT threshold (£85,000) from April 2022.

It will then be extended further from April 2023 to all taxpayers who file income tax self-assessment tax returns for business or property income above £10,000 annually. 

The Treasury said that the extension of MTD will only affect the way that tax is reported and not the amount that is collected. 

Financial Secretary to the Treasury, Jesse Norman, said: “We are setting out our next steps on Making Tax Digital today, as we bring the UK’s tax system into the 21st century.

“Making Tax Digital will make it easier for businesses to keep on top of their tax affairs. But it also has huge potential to improve the productivity of our economy, and its resilience in times of crisis.”

In a Written Ministerial Statement to Parliament on MTD the Treasury also said that “the Government remains committed to extending Making Tax Digital to other taxes”.

It is hoped that the long deadline to comply with the extension of MTD will give businesses, landlords and agents time to prepare and allow for the development of new products, including free software for businesses with the simplest tax affairs.

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