HMRC’s flagship programme to move all its tax services online, has seen many stops and starts over the years. So where are we up to now with Making Tax Digital?
The initial transition period, during which full digital links did not have to be in place, expired for VAT return periods starting on or after 1 April 2021. Businesses now need to be fully compliant with the MTD for VAT rules. If you have any uncertainty, we can provide guidance on what does and doesn’t constitute a digital link. From April 2022, MTD for VAT will apply to all VAT registered businesses, even voluntary registrations.
This phase of the programme is not expected before 2026. A pilot is planned from 2024.
Income Tax Self Assessment
MTD rules will apply from 6 April 2023 for unincorporated businesses and landlords with total business or property income of more than £10,000 per year.
HMRC had intended to expand the pilot scheme substantially from April 2021 to bring in the vast majority of sole traders and landlords. This has now been pushed forward to April 2022, reducing the two-year period to trial the system. Taking into account the considerable demands of the new rules – such as using MTD-compatible software to file quarterly summaries of business income and expenses and plus an end-of-year finalisation – we recommend making an action plan for your business now.