Making Tax Digital for income tax deferred

During the non-news week before Christmas, there was a significant announcement on the Making Tax Digital (MTD) scheme for income tax.

In recent months, you could be forgiven for thinking that the infrastructure of UK plc was falling apart. One element of the general malaise that received less publicity than it arguably deserved was an announcement from the Treasury about HMRC’s tax technology masterplan, MTD.

The idea of MTD started in 2015, when the then Financial Secretary to the Treasury promised that, “By 2020, HMRC will have moved to a fully digital tax system where bureaucratic form-filling is eradicated – taxpayers should never have to tell HMRC information it already knows.” Three years beyond that target date, and six financial secretaries later, the plan has not quite lived up to expectation.

A key feature of MTD is that taxpayers are required to submit quarterly returns digitally to HMRC. As VAT was already subject to quarterly reporting, it was the first tax to come within MTD system in April 2019. Until the pre-Christmas announcement, MTD had been due to be extended from April 2024 to landlords and self-employed individuals with gross annual income of more than £10,000. Most general partnerships with income over £10,000 were due to join a year later.

On 19 December, two days before the House of Commons went into recess, the current Financial Secretary to the Treasury issued a written statement announcing that:

For landlords and the self-employed with gross income of over £50,000 a year, MTD would become mandatory from April 2026.
Landlords and the self-employed with gross income of over £30,000 a year would enter MTD from April 2027.
The government will “review the needs of smaller businesses, and particularly those under the £30,000 threshold”.
General partnerships will now become subject to MTD “at a later date” than April 2025.

The Institute of Chartered Accounts of England and Wales echoed the view of most tax professionals when it said “over the last several months it had become clear that a deferral was inevitable…”

Before you breathe a sigh of relief, nobody expects MTD to disappear. As the Autumn Statement showed, the Treasury will not miss any opportunity to raise more revenue.

Tax treatment varies according to individual circumstances and is subject to change.

The Financial Conduct Authority does not regulate tax advice.

Making Tax Digital for income tax deferred

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