The Government recently announced that the introduction of Making Tax Digital (MTD) initiative would be deferred for the self-employed and landlords.
The idea for Making Tax Digital was first announced in 2015. David Gauke, Financial Secretary to the Treasury, promised that HMRC would have moved to a fully digital tax system by 2020. This was to eradicate “bureaucratic form-filling” and avoid taxpayers “telling HMRC information it already knows”. Now three years beyond that initial target date, and six financial secretaries later, MTD has not quite met expectations.
What is Making Tax Digital?
Making Tax Digital is a part of the government’s Tax Administration Strategy. It requires businesses and individuals to keep digital records and submit quarterly returns to HMRC each year.
Digitising the tax system is intended to reduce the amount of tax lost due to avoidable errors and improve the accuracy of digital records. MTD in theory should make it easier for businesses and individuals to ensure their tax is correct.
What is the timeline for MTD?
Already subject to quarterly reporting, VAT was due to be the first tax brought under the MTD system in April 2019. From April 2024, MTD was due to be extended to landlords and the self-employed with gross annual income of more than £10,000. Most general partnerships with income over £10,000 were due to join a year later.
However, the updated timelines for the introduction of Making Tax Digital following the deferral announcement are:
- 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.
We will inform you of any further government updates to the Making Tax Digital scheme. If you would like to speak to one of our advisers in the meantime about your tax return – please do get in touch.
Tax treatment varies according to individual circumstances and is subject to change.
The Financial Conduct Authority does not regulate tax advice.