Don’t get caught out – learn when you need to register for Making Tax Digital (MTD) in this article.

HMRC has launched three MTD schemes aimed at making tax returns more efficient, but which ones apply to you and your business? Discover:

  • Who needs to register for Making Tax Digital, and when?
  • What does MTD do for businesses?
  • Can I use accounting software and register early?
  • How to make MTD simple for your business with Countingup

Who needs to register for Making Tax Digital, and when?

HMRC’s Making Tax Digital initiative is being rolled out across a number of different taxes, including VAT, income tax, and corporation tax. Registering for MTD largely depends on your turnover levels and what type of business you are. Find out how each branch of MTD will affect your business below.

Making Tax Digital for VAT

Small businesses (sole traders and limited companies) need to register for VAT when their turnover reaches the VAT threshold of £85,000. Turnover is independent of your profit and so even if you make less than this threshold figure in profit, you may be required to register your business for VAT.

Making Tax Digital for VAT uses the same threshold figure, requiring businesses to sign up for MTD for VAT and register for VAT at the same time. Small businesses need to register for Making Tax Digital for VAT by April 2022. Therefore, if your business’ turnover grows beyond this threshold before this date, you’ll need to sign up for both.

Sign up for MTD for VAT here using software like Countingup, your Unique Taxpayer Reference (UTR) and National insurance number (if you’re a sole trader) or company’s registration number. If your VAT is due soon through direct debit, HMRC recommends you don’t sign up seven days before or five days after this date to avoid double payments (whichever one applies to you).

Making Tax Digital for Income Tax

Making Tax Digital for Income Tax applies to self-employed business owners and landlords with property income over £10,000 per year. Here, this threshold refers to your net profit

Sole traders and landlords will need to register for MTD for Income Tax by April 6th 2023 and follow the associated rules regarding digital accounting and record keeping. Once you’ve signed up, you’ll send tax updates to HMRC every three months. Even though this is more frequent than the current system, it should be quicker, more accurate, and less hassle each time. 

Sign up for MTD for Income Tax here using your Government Gateway ID and password. You’ll need to provide details about your business, including its name, email address, information on the accounting period you use and the accounting software you plan on using.

Making Tax Digital for Corporation Tax

Making Tax Digital for Corporation Tax isn’t currently available but is planned as early as 2026. 

HMRC and the UK government recently finished a consultation for Making Tax Digital for Corporation Tax in March 2021 that considered how MTD might be implemented across various industries and sectors. 

If you run a limited company, you can be ready for the deadline when it comes and take advantage of all the benefits that integrated accounting solutions provide, including straightforward and more accurate accounting. Then, when the deadline does finally come, your company’s finances will be able to transition with ease. 

What does MTD do for businesses?

Making Tax Digital presents businesses with the opportunity to save time and hassle from their accounting. With innovative accounting software like Countingup available you’ll be able to do the following:

  • Spend less time entering expense record data
  • Keep more accurate income and expense records while on the go
  • Reduce your paperwork and burden for keeping records
  • Save time from calculating expense claims and tax liabilities
  • Understand your business’ trading performance faster and more accurately
  • Use automated invoicing and categorisation tools to keep your records more organised
  • Share your accurate, real-time data with your accountant in instants

Can I use accounting software and register early?

Yes! 

Small businesses can register for Making Tax Digital for VAT even if they fall below the VAT threshold. To do so, you’ll need to register for VAT and MTD for VAT to complete your returns.

Similarly, the deadline for MTD for Income Tax isn’t until 2023. Therefore, you can start using accounting software for your self-assessment tax returns and be ready for MTD for Income tax when it arrives.

Even with the furthest away deadline for MTD for Corporation Tax, companies should consider using integrated accounting software to improve the quality and accuracy of their accounts.

How to make MTD simple for your business with a simple app

Sole traders and limited company directors can take advantage of Countingup for their MTD needs. Countingup is the two in one solution ready for your business’ future: a business current account with free, built-in accounting software. 

With your business’ financial information in one place, Countingup can help you automate the time-consuming aspects of bookkeeping and tax filing to save you time and stress while you build your business. You can share your real time financial data with your accountant in a couple of taps, making VAT returns easier and meaning you’ll be ready to meet HMRC deadlines and requirements with ease.

You can also take advantage of key business tools like automated invoicing, expense reminders and categorisation to keep your records up to date and accurate, as well as handy expense reminders and real-time profit and loss data ready for you at a glance.

Find out more here and sign up for free today.