Making Tax Digital Update

Making Tax Digital (MTD) will become mandatory for the self-employed and landlords in 2024. Although there is no major news, a recent webinar co-hosted by HMRC has shed more light on the sign-up process, the use of spreadsheets and joining the pilot scheme.

MTD will come into effect for accounting periods commencing on or after 6 April 2024. For general partnerships (those with only individuals as partners), the start date is 6 April 2025.

Large partnerships with 20 or more partners are not included within the definition of a general partnership, and for them – along with other non-general partnerships – there is still no start date.

Signing up

It is going to be necessary for each taxpayer to sign up individually, but tax agents will be able to do this on behalf of clients. Agents will be able to sign up clients up to 12 months in advance of needing to comply with MTD.

Unfortunately, no further details have been provided, although HMRC did say the process will be different to the current MTD pilot sign-up process, which requires a substantial amount of information, plus a Government Gateway account.

Spreadsheets

HMRC has made it clear that spreadsheets can be used to fulfil the record-keeping requirement of MTD. However, when it comes to the filing requirement, MTD-compatible bridging software will be necessary.

The bridging software will need to be more advanced than that used for MTD for VAT. That is because for VAT returns, information is only sent in one direction – to HMRC. For income tax submissions, the software will also receive data from HMRC.

Pilot scheme

The scope of the pilot is still quite restricted, with taxpayers only able to sign up through their software provider.

  • Anyone who needs to report income from other sources, such as employment income, cannot join.
  • Only sole traders and landlords with a 5 April accounting date (not 31 March) can join.
  • Anyone who is not up to date with their tax payments (so excluding those who have set up a time to pay arrangement) or tax return submissions cannot join.

HMRC’s list of software that is compatible with MTD for income tax can be found here.

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