MTD for Income Tax

What is it?

Making Tax Digital (MTD) is a programme of changes that allow taxpayers to provide information electronically to HM Revenue & Customs, making it accessible on more of a real time basis.

The first of these changes was introduced in April 2019 for all VAT registered businesses, other than those which are exempt, and now plans are afoot to roll out the next stage of the programme – MTD for income tax (and in the future corporation tax).

When does it start?

In December 2022 we were told that MTD for income tax would be introduced on 6 April 2024, with phased legislation bringing various landlords and self-employed individuals into the scope of submitting digital returns over the subsequent years based upon their income levels.

But the introduction was delayed due to the challenging economic conditions and several scathing attacks from Select Committees. 

The new timeline means that the self-employed, and landlords with incomes of more than £50,000, will be within the scope of MTD for income tax from April 2026.

Those on incomes between £30,000 and £50,000 will need to comply from April 2027, although most will be able to join voluntarily in advance of these deadlines.

What does it mean for me?

Businesses and landlords will need to use software to keep their business records digitally. 

This may include introducing dedicated record-keeping software or a combination of software packages and spreadsheets.

The information contained with the MTD income tax returns will be generated by pulling information from the digital records.

This information is currently proposed just to be those specified on the self-assessment tax return pages so HMRC will not receive details of all of your transactions, just the usual level of summary details reported on the full tax return pages.

In the case of spreadsheets, this means that the software you use must be capable of taking the relevant information from the spreadsheet electronically and sending it to HMRC. Information cannot be re-typed into another software package.

How can Beatons assist?

The transition from the current filing arrangements for income tax to Making Tax Digital will be different for every business and landlord, dependent upon the systems and software they currently use.

Beatons can assist in the transition process with a number of options. We can:

  • Review your current practices and systems to see whether these will be MTD compliant
  • Review whether current software will be compatible and costs, if appropriate, for upgrades (as accountants we can often offer cheaper software costs than purchases directly from software providers)
  • Review available software options which might be appropriate to your business, whether spreadsheet bridging systems or transition from spreadsheets to accounting software
  • Offer ongoing support with accountancy software, reviewing or submitting quarterly filing and accountancy queries
  • Offer a complete outsourcing solution which takes over your bookkeeping requirements including MTD and frees you up to focus on your business / letting or other things.

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