Making Tax Digital for Income Tax (MTD) is the government’s new digital tax reporting system for businesses and landlords that complete Self Assessment tax returns. It requires records of income and expenditure to be kept digitally, with quarterly reports made to HMRC using MTD-compatible software. The aim is to improve accuracy and efficiency and make it easier for Self Assessment tax payers to get their income tax right.
Last year, the MTD programme was pushed back from its planned enforcement date of April 2023 to April 2024 because of the impact of the pandemic. Now the government has amended its plans again.
What’s changed?
There are two significant changes to know about:
- Originally, all Self Assessment tax payers earning above £10,000 had to comply with MTD rules. However, that threshold has now been raised to £30,000. If your income is under £30,000, there will be no mandate to use the scheme until a review has been completed into (a) how the system can be shaped to meet the needs of smaller businesses and (b) the best way for them to fulfil their tax obligations.
- The dates when MTD becomes mandatory have been pushed back further:
- April 2026 for self-employed individuals and landlords with an income of more than £50,000
- April 2027 for those earning between £30,000 and £50,000.
In her statement in December 2022, The Financial Secretary to the Treasury, Victoria Atkins, said: “It is right to take the time needed to work together to maximise those benefits of MTD for small business by implementing gradually. The government is therefore announcing more time to prepare, so that all businesses, self-employed individuals, and landlords within scope of MTD for Income Tax, but particularly those with the smallest incomes, can adapt to the new ways of working.”
If you’d like to get ahead of the deadline and iron out any initial issues with using the software before it becomes mandatory, there’s already a live pilot up and running. You can sign up here now.
VAT registered businesses already have to comply
And HMRC is now automatically signing up VAT registered businesses for Making Tax Digital for VAT. So, if you have a business that becomes VAT registered in the future, there’s no need to sign up yourself. Full information is available via the GOV.UK website.
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