Making Tax Digital update

MTD for the self-employed and landlords will come into effect for accounting periods beginning on or after 6 April 2024. For general partnerships (those with only individuals as partners), the start date will be 6 April 2025.

Large partnerships with more than 20 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 for MTD

Each taxpayer will need to sign up separately, 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 though, no further details have been provided. HMRC has said however that the process will be different to the current MTD pilot sign-up process, which requires a considerable amount of information, plus a Government Gateway account.

Spreadsheets

HMRC has confirmed 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 what is currently 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 scheme 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.