Making Tax Digital (MTD) – are you prepared?

Our Private Client Tax leaders recently met with HMRC director Giles McCallum and MTD Agent Lead Sam Wood to discuss the roll out of MTD and how it will affect our clients.

MTD for individuals will be introduced in April 2024 for landlords and business owners with income over £10,000. It will mean the end of a self-assessment tax return for those who qualify, and instead quarterly filings will need to be made with a final assessment, similar to a tax return, at the year end. The filing dates will typically be:

Period coveredFiling deadline
Quarterly update 16 April to 5 July5 August
Quarterly update 26 July to 5 October5 November
Quarterly update 36 October to 5 January5 February
Quarterly update 46 January to 5 April5 May

MTD is a key part of the government’s plan to make it easier for individuals and business to get their tax affairs right and keep on top of their affairs. HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world, with tax administration being fundamentally changed to become more efficient, effective and easier.

HMRC wanted our opinion on how we see MTD working with our clients and in practice. We expressed that we are already committed to using the most advanced technology and already have MTD compliant software available to our clients however, we did have some questions to understand the practicalities of certain clients switching to digital as well as agent access. It was determined that we can adapt our service offering to suit every client’s needs, whether they are technically minded or still prefer to pass us records to process for them. HMRC understand the importance of having more than one agent being able to access the records, particularly for individuals who use a bookkeeper separate to a tax advisor.

A key benefit for us as tax advisors is that MTD will highlight the results of a business earlier than perhaps we would typically see, because we will see quarterly income levels of the rental or sole trade business. This will be helpful for pension planning and other cashflow forecasting. HMRC representatives also noted that having regular filings will be much more helpful should a similar event happen in future to what we saw in 2020 with the pandemic, particularly with the administrative system created for support grants.

All individuals that meet the income criteria for a business or rental property will be expected to comply and only those that are ‘digitally excluded’ can apply to opt out. It will be rare that HMRC will agree to an individual being digitally excluding, particularly if that individual uses an accountant or agent.

Pilot testing

We will be taking part in the MTD pilot so we can be fully prepared for the implementation in 2024 as well as have the opportunity to feed back any concerns to HMRC. If you would like to participate in this, please let us know. If you participate you will be switched to MTD early and will not have to file a self-assessment tax return for the same tax year.

Going forward

As we participate in the pilot and provide feedback to HMRC, we will inform our clients of changes or new information released. In the meantime, if you do not already use digital software it is a good time to start thinking about how MTD may impact you. As always, we are here to help and guide you through the process.

Contact us

If you have any queries, please do not hesitate to contact us at advice@taitwalker.co.uk.