Making Tax Digital (MTD) has been a key focus point for the government for the last 10 years, and the Chancellor’s Spring Statement detailed how this will continue to roll out for more and more taxpayers in the coming years.
With the income tax threshold for Making Tax Digital being progressively lowered, it is important to get organised and prepared for this advancement towards a more modern way of returning taxes.
The government initiative to modernise and digitise the tax system has been gradually taking shape for a decade now. It was first announced back in 2015 and became mandatory for the payment of VAT by organisations with a higher turnover than the VAT threshold of that time (£85,000) in 2019.
Following the rollout of MTD for VAT, the government planned to expand the scheme to include income tax, but that was met with several delays. Eventually, it was announced that self-employed people and landlords would have to follow MTD requirements for income tax from 6 April 2026 if their annual business or property income is more than £50,000, and April 2027 if their income is above £30,000.
At this year’s Spring Statement, the Chancellor announced a number of measures to prepare for the further implementation of MTD. This includes lowering the income threshold to anyone earning over £20,000 a year from April 2028. This will bring an additional 900,000 people into the plans for MTD, and it also paves the way for a future introduction of Making Tax Digital for corporation tax.
The first individual taxpayers will be introduced to MTD in the 2026/27 financial year, but the first self-assessment returns for the new scheme won’t be required until the end of January 2028, giving you a little extra time to prepare for this change.
This means you should be looking at different software you can use to file tax returns digitally, particularly tools that can provide a full annual service rather than quarterly, which a lot of online software is limited to. HM Revenue & Customs (HMRC) is working with tax bodies and software providers to improve guidance and access to the correct software, in a bid to avoid people missing out before the deadline.
There will be exemption options available once MTD is fully rolled out, catering for people who, for whatever reason, cannot keep electronic or digital records. If you consider yourself digitally excluded, you can apply for an exemption from Making Tax Digital, so long as you meet one of the following criteria:
The estimated four million sole traders and landlords earning under £20,000 are expected to be brought into the MTD fold in the future, with the government saying it is exploring its options around how and when to roll this out.
There are also still a few more regulations for the government to iron out before we have a full, complete picture of what MTD will look like, so be sure to keep an eye out for HMRC and government updates across the next few months.
Just because a full list of regulations hasn’t been made available yet, does not mean you shouldn’t get prepared in advance. The plans for MTD have been long discussed, but after a few delays it will be brought in for income tax next year, followed by corporation tax. It will do you no harm to anticipate the changes ahead of time, to avoid being tripped up by any potential shorter-term changes down the road.
Ultimately, this is a requirement that is inevitable for the government to roll out, as the reliance on technology becomes greater in modern society, so you are best served getting systems in place at your earliest convenience. It can also be beneficial to familiarise yourself with the MTD systems and protocols, giving yourself more time to learn the ins and outs of the initiative.
To find out more on how Duncan & Toplis can help you prepare for Making Tax Digital, get in touch with our expert team today.
