The new Labour government has confirmed that the Making Tax Digital (MTD) initiative will go ahead. It had been unclear whether the policy introduced by the Conservatives would be followed in the same way and to the same timeline. However, the Autumn budget appeared to support the programme’s existing timeline.
What is Making Tax Digital?
Making Tax Digital aims to modernise the UK tax system by digitising tax administration to reduce errors, improve compliance, and streamline the process of submitting tax returns. This will be achieved with digital record keeping using compatible software and the submission of quarterly updates to HMRC.
A realistic deadline?
Making Tax Digital is set to come into force in April 2026. Whilst the initiative itself has been confirmed it’s still worth noting that the deadline is a tricky one to meet, needing HMRC, software developers and the whole industry to work closely together. The quarterly reporting regime is a fundamental shift in how businesses manage their accounts and interact with customers and clients. Yet modernising the system should improve productivity, make things easier for small businesses, and cut the time spent on tax administration.
In a surprise announcement the government also now plans to expand the rollout of MTD to those with incomes of more than £20,000. Until now it was expected that MTD would only affect those whose incomes are more than £50,000, beginning in April 2026, and those with incomes of £30,000 in April 2027.
E-invoicing
For many the success of Making Tax Digital lies with digitising the entire system, including invoicing. As part of the shift the government has announced a consultation on using e-invoicing across the UK. More details are expected in the New Year.
To discuss the Making Tax Digital initiative, and how it affects you, please get in touch.