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Making TAX digital



MTD for VAT

All VAT-registered businesses are now within MTD for VAT and VAT-registered businesses with turnover below the VAT registration threshold of £85,000 which have not already signed up to MTD for VAT voluntarily must comply with the requirements from the start of their first VAT accounting period beginning on or after 1 April 2022. Under MTD, records must be maintained digitally and VAT returns must be filed digitally using MTD-compatible software.


Basis period reform

MTD for Income Tax will apply to businesses and Landlords in relation to their trading and property income where their gross income from these sources is more than £10,000 for the tax year from 6 April 2024. Ahead of its introduction, the rules on basis periods are being reformed.


Currently, the current year basis applies to unincorporated businesses under which once the business is up and running it is taxed on the profits for the accounting period that ends in the tax year (so, for example, the profits for the year to 31 December 2022 are taxed in 2022/23). Different rules apply in the opening and closing years of the business.


However, from 2024/25, profits will be taxed on a tax-year basis, so the profits for 2024/25 will be those for the period from 6 April 2024 to April 2025. Where the accounting period is different to the tax year, apportionment will be needed to arrive at the profits for the tax year.


To move from the current year basis to the tax year basis, 2023/24 will be a transitional year.

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