New MTD ‘map’ reveals Income Tax and SA details
New draft legislation to extend Making Tax Digital – including applying it to Income Tax Self-Assessment - was revealed by the Government today.
Details on when income tax would be incorporated into MTD have been eagerly awaited for some while.
Officials have released a new MTD 'roadmap', alongside draft legislation for The Finance Bill 2020-21.
What does the plan include?
The programme will be extended to:
- taxpayers who file income tax self-assessment tax returns for business or property income over £10,000 annually from April 2023
- all VAT registered businesses with turnover below the VAT threshold (£85,000) from April 2022
What else is included?
HMRC will expand its pilot service from April 2021 to allow businesses and landlords to test the full end-to-end service before the requirement to join.
Setting out a timetable to 2023, “allows businesses, landlords and agents time to plan, and gives software providers enough notice to bring new Making Tax Digital products to market, including free software for businesses with the simplest tax affairs,” the Government said.
How does it fit in to the bigger picture?
HMRC said, so far, more than 1.4 million taxpayers are successfully using MTD for VAT – including over 30% of VAT-registered businesses with turnover below the VAT threshold who have joined voluntarily.
Officials said the MTD expansion was part of the Treasury’s long-term tax digitisation plan – “designed to boost national productivity, make it easier for businesses and people to pay tax and reduce avoidable errors and fraud”.
The Ministerial Statement cited independent research commissioned by HMRC. This showed businesses within MTD, which fully integrate their accounting and tax software, report spending less time on their tax. Micro-businesses who use software to manage their accounts have over 10% higher productivity, according to the Enterprise Research Centre.
The Government estimates that £8.5 billion was lost revenue due to ‘avoidable errors’ in 18/19 and says digital tools will reduce this. Financial Secretary to the Treasury, Jesse Norman, believes the MTD expansion “has huge potential to improve the productivity of our economy, and its resilience in times of crisis.”
What is IRIS doing?
At IRIS, we have always prided ourselves on being ahead of legislative change in 41 years of making software for accountants.
In 2018, IRIS became the first software vendor to be listed as approved by HMRC for MTD filing. Rowleys Chartered Accountants, a long time IRIS customer, became the first UK accountancy practice to complete a quarterly MTD filing submission using IRIS Personal Tax.
We’ll continue to work closely alongside HMRC, and we’ll ensure every change included in the MTD expansion is reflected in our software.
Want to learn more about our tax solutions? Visit this page or call 0344 844 9644.