Although Making Tax Digital [“MTD”] will take effect only for VAT from 1 April 2019, we must remember that, ultimately, MTD will be rolled-out across all business taxes.
In this respect, after a year-long testing phase, HM Revenue & Customs [“HMRC”] has just opened up its MTD Income Tax pilot to allow the self-employed to register, with unincorporated landlords likely to follow next month.
HMRC has announced that self-employed businesses can now voluntarily use software to keep their business records digitally and to send Income Tax updates to HMRC instead of filing a self assessment tax return.
This super-soft launch is welcome, but it serves to remind us that all businesses will, in the foreseeable future, be obliged to maintain their accounting records digitally to meet HMRC’s wish to record financial information in real time.
Given that there are currently only two software houses supporting MTD for Income Tax, we don’t believe there will be a rush to the front by the self employed. However, assuming mandatory MTD for VAT launches without problem in 2019, we can see MTD for Income Tax following closely behind.