The next steps in an ambitious plan to create a modernised digital
tax system fit for the 21st century was unveiled by the government
today.
As part of the Treasury’s long-term tax digitisation plan -
designed to boost national productivity, make it easier for
businesses and people to pay tax and reduce avoidable errors and
fraud - HMRC’s Making Tax Digital programme will be gradually
extended.
At present, businesses above the VAT threshold of £85,000 are
covered by the system, which requires them to keep digital
records and provide VAT returns through software. Since it was
introduced in 2019 more than 1.4 million businesses have joined
the programme, submitting over 6 million returns.
From April 2022, the programme will be extended to all VAT
registered businesses with turnover below the VAT threshold
(£85,000), and from April 2023, it will apply to taxpayers who
file income tax self-assessment tax returns for business or
property income over £10,000 annually.
Financial Secretary to the Treasury, , 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.
Making Tax Digital changes will affect the way that taxes are
reported, not the level of tax that is collected. It will help to
minimise avoidable mistakes – which cost the exchequer £8.5
billion in 2018-19.
The long lead-in time will allow businesses, landlords and agents
time to plan. It also gives software providers enough notice to
bring a range of new products to market, including free software
for businesses with the simplest tax affairs.
Over 30% of smaller VAT-registered businesses, who are not yet
required to use Making Tax Digital, have chosen to do so
voluntarily because of the wider benefits the digital tools
offer, including fewer errors and increased productivity.
Other countries have already done this - Denmark introduced a
digital system back in 2014, and digital reporting is now
well-established and has reduced the amount of time businesses
spend on their tax affairs.
The extension is part of a number of announcements which deliver
on government commitments and give taxpayers clarity over the
future direction of travel. As part of this, the government is
today also publishing draft legislation for the next Finance
Bill, a regular annual publication.
Notes
To see all new announcements and immediate effect measures please
see here Written Ministerial
Statement
To see draft Finance Bill 2020-21 legislation and supporting
documents Finance Bill
