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How does it affect me?
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VAT
The first stage of MTD was introduced in 2019. Since 1 April 2022 all VAT-registered businesses have been required to keep digital records and use MTD-compatible software to submit VAT returns electronically.
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Income tax
Self-employed business owners and landlords with annual business or property income above £50,000 will need to follow new MTD rules for income tax from 6 April 2026.
Those with an income of more than £30,000 will have to follow the rules from April 2027. Partnerships will be required to join at a date yet to be announced.
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Corporation tax
A consultation has been published on MTD for corporation tax and you’ll also have the chance to take part in a pilot. No one will have to use it before 2026.
Your MTD-ready accounting software
FreeAgent accounting software automatically generates your MTD-compatible VAT returns as you do your books and lets you submit them directly to HMRC in minutes. FreeAgent is free subject to customer retaining their Ulster Bank Northern Ireland business banking current account. Optional add-ons may be chargeable.
What are the benefits of MTD?
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Better use of information
You won’t have to give HMRC information twice. Employers, banks, building societies and other government departments will all feed their information into one place.
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Tax in real time
HMRC will deal with anything affecting tax as close to real time as possible, to help prevent errors and stop tax due or any repayments you owe building up.
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A single financial tax account
You’ll see a comprehensive financial picture in your digital account. It’ll be like online banking but with a personalised picture of your tax.
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Digital contact with customers
Business owners will get prompts, advice and support through webchat and secure messaging.
Making Tax Digital (and simple) with FreeAgent
MTD for VAT requires all VAT-registered businesses to keep digital records and use MTD-compatible software to submit VAT returns. With FreeAgent, you can file MTD VAT returns directly to HMRC and you’ll be ready for MTD for Income Tax when it comes into effect. It’s also free with your business current account (specific account eligibility apply). Optional add-ons may be chargeable.
Making your business more digital
It’s not just the tax system that can reap the benefits of going digital. If you don’t have a website for your business, you might be missing out on new markets, and if you do already have one, have you considered other ways to do business online, like offering workshops or online events?