MTD for Tax

Making Tax Digital (MTD) for income tax will not be mandated until April 2020 at the earliest and many details of the requirements are still unknown.

MTD for income tax will apply to the self-employed, Partnerships and to those who have income from property. Most of this legislation at present is still in the drafting stages and will not be laid before parliament or be published until the government decides to mandate MTD for income tax.

The draft legislation also includes an exemption for the largest partnerships, defined as those with a turnover of more than £10m.

When MTD for income tax becomes mandatory businesses within scope will be required to:

maintain their accounting records digitally in a software product or spreadsheet. Maintaining paper records will no longer meet the requirements in tax legislation; and
submit information quarterly to HMRC and finalise their tax position after the end of the tax year. The quarterly updates and end of year reports will need to made using a functional compatible software product that can access HMRC’s API (Application Program Interfaces) platform.
Businesses within scope will need to acquire a suitable commercial software product or appoint an agent to submit information to HMRC on their behalf. HMRC’s paper and online self-assessment return will remain available only to businesses outside the scope of MTD for income tax.

Businesses will be able to choose their periods of account and their update periods. The basic requirement will be for four quarterly updates a year. The legislation does not allow HMRC to require returns more often, but a business will be able to submit extra updates mid-cycle if it wants to submit an extra one. The time window for submission will be from 10 days before the quarter end to one month after.

Click here for more information from HMRC website