Making Tax Digital (MTD) is a UK government initiative designed to make it easier for individuals and businesses to get their tax right.
It requires certain taxpayers to keep digital records and submit tax information to HMRC using Making Tax Digital compatible software.
What are the current Making Tax Digital requirements?
Making Tax Digital for VAT
Making Tax Digital is already in place for VAT and replaces the manual submission of tax returns through the HMRC portal. From April 2020, most VAT registered businesses with a turnover above £85,000 must:
- Keep their VAT records digitally
- Use Making Tax Digital compatible software to submit their VAT returns to HMRC
The aim of Making Tax Digital is to:
- Reduce errors caused by manual processes
- Improve the accuracy of tax submissions
- Create a more efficient and transparent tax system
For more information on how Making Tax Digital for VAT works in practice within Alto, see the Making Tax Digital for VAT - User Guide.
Making Tax Digital for Landlords (income tax)
Making Tax Digital (MTD) requirements for unincorporated landlords are being introduced and will change how landlords report their income and expenses to HMRC. Under Making Tax Digital, landlords must keep digital records of their property income and expenses and submit updates to HMRC quarterly using Making Tax Digital compatible software.
Making Tax Digital for Landlords will be phased in over two years as follows:
- From April 2026, for those with qualifying income over £50,000
- From April 2027, for those with qualifying income over £30,000
For more information on how Making Tax Digital for Landlords works in practice within Alto, see the Making Tax Digital for Landlords - User Guide.
What is Making Tax Digital compatible software?
Making Tax Digital compatible software is a software program, or set of software programs, products or applications, that must be able to:
- Record and preserve digital records
- Provide to HMRC information and returns from data held in those digital records by using the API platform
- Receive information from HMRC via the API platform
Is Alto Making Tax Digital compatible?
Alto does not hold all the information needed to complete a VAT return, so it is not HMRC Making Tax Digital-compatible on its own.
However, Alto does record and save digital records so when used alongside other programs, it is still a component of HMRC compatible software.
To find out which accounting software is compatible and can link to the HMRC API, visit https://www.gov.uk/guidance/software-for-sending-income-tax-updates.
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