Making Tax Digital: Index & timeline

When does Making Tax Digital (MTD) apply? What does MTD really mean? How will it affect you?

This is a Freeview 'At a glance' guide to Making Tax Digital: Index & timeline

At a glance

Current timetable

Making Tax Digital (MTD) for VAT

From April 2022, all VAT registered businesses must retain digital records and submit their VAT returns to HMRC using 'functional compatible software', unless an exemption such as digital exclusion applies.
Once in MTD for VAT, a business remains in MTD for VAT unless it Deregisters for VAT.

Our Making VAT Digital Zone contains guides and updates including a Making VAT Digital (MVD) subscriber guide.

MTD for Income Tax

MTD for Income Tax is the second phase of digitising tax record keeping.

From April 2024: individuals can once again volunteer to participate in the MTD for Income Tax pilot program (Re-opened April 2024).
From April 2026: MTD for Income Tax will be mandated for self-employed businesses and landlords with turnover above £50,000.
From: April 2027: MTD for Income Tax will be mandated for self-employed businesses and landlords with business turnover above £30,000.
For businesses that commence on or after 6 April 2025, usually MTD will not start until 6 April following the tax year in which they commenced trading. (see Digital start date).
HMRC will review smaller businesses (with turnover of less than £30,000) to decide if they will be mandated to join MTD.
No timetable has yet been introduced for partnerships.

MTD for Corporation Tax

HMRC have stated that MTD for corporation tax will not be mandated before April 2026.

MTD News Timeline

A log of MTD as it evolves.

22 April 2024

On 22 April 2024, HMRC issued updated guidance on Making Tax Digital (MTD) for Income Tax. After a pause in the Pilot in February 2023, HMRC has now confirmed the expansion of the pilot from April 2024.

Check your eligibility using our MTD Income Tax Pilot Tool

15 March 2024

The Income Tax (Digital Requirements) (Amendment) Regulations 2024 came into effect. These regulations made a number of changes to the The Income Tax (Digital Requirements) Regulations 2021. Most notably they,
- Amended the date that the principle regulations come into force from 6 April 2024 to 6 April 2026.
- Changed the digital start date where a relevant person commences carrying on a business on or after 6th April 2025 and is required to make or deliver a return, the digital start date is 6th April in the year of assessment following the year of assessment in which the person was required to deliver the return.
- Chnaged the quaterly deadlines from 5th to the 7th, to be in line with VAT reporting deadlines.
- Quarterly updates will now be on a cumulative basis, allowing errors to be corrected as part of the following update and removing the need to resubmit previous quarters.
- The End of Period Statement (EOPS) has been removed as a formal requirement.
- Exemptions for foster carers, and those without a National Insurance Number have been introduced.

See, The Income Tax (Digital Requirements) (Amendment) Regulations 2024

22 November 2023

At the Autumn Statement 2023, the government plans to make design changes to Making Tax Digital for Income Tax Self Assessment by:

Simplifying the requirements for all taxpayers in providing quarterly updates and for taxpayers with more complex affairs, such as landlords with jointly-owned property.
- Rather than requiring a total for the three months covered by each update, each update will be a cumulative total of income and expenses accumulated for the tax year to date. This should avoid the need for corrections to previous updates when errors have been identified.
- Joint property owners will be able to decide whether they want to provide quarterly updates or not and will have less onerous digital record-keeping requirements.
Removing the requirement to provide an End of Period Statement.
Exempting some taxpayers from MTD altogether, including those without a National Insurance number and foster carers.
Enabling taxpayers using MTD to be represented by more than one tax agent.
Draft regulations will be published for technical consultation later in 2023 with a large-scale public beta testing programme commencing in 2025.
The policy paper confirms that MTD for ITSA will not be extended to businesses with income below £30,000 for the foreseeable future though this will remain under review.

February 2023

HMRC confirm that the pilot scheme has been closed for new sign-ups.

19 December 2022:

Financial Secretary to the Treasury, Victoria Atkins, announces that MTD for ITSA will be posponed until 2026.

15 December 2022:

Accidental leak from HMRC or fake news?HMRC's MTD ITSA pilot page appeared briefly to say that the pilot will run until 2026. It was then taken down.

More calls for postponement

The CIOT and ATT have published the results of their MTD survey canvassing the views of tax professionals on Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA). Most respondents did not believe that the rollout could be a success and they suggested that HMRC postpone mandatory MTD filing for at least a year.

November 2022: Calls for postponement

The Administrative Burdens Advisory Board in their 2022 Annual Report recommend that the whole MTD ITSA project needs to be delayed by at least a year. They site five areas of particular concern:

MTD ITSA is a far more complex proposition than MTD for VAT and over four million self-employed individuals and landlords will be required to sign up for MTD ITSA in April 2024. There will be many different combinations of income and expense types in this population, and as many real-life scenarios as possible must be thoroughly tested through the pilot. The restriction of the pilot to businesses with a 5 April year-end is hamstringing the programme. This restriction should be lifted as soon as possible.
Basis Period Reform has complicated the picture.

As we discuss further below, we can see the merit in this reform as an overall simplification, but 528,000 businesses will have to apportion two years’ accounts to arrive at their taxable profit. Of these, 278,000 businesses will have to estimate their second year’s profit for this calculation. This introduces more complexity for the affected businesses, and we question whether adequate support and necessary easements will be in place.
The decision to align the MTD ITSA quarterly reports with the tax year rather than the accounts year was unexpected and potentially adds further complexity.
Error correction.

While an error or omission in an MTD for VAT quarterly return must be corrected in the next return following discovery, we have recently learned that HMRC will require an error or omission in an MTD ITSA return to be corrected by resubmission of the return for the period in which the error or omission arose. This seems inconsistent and will increase still further the number of submissions MTD for ITSA.
Other issues.

The need to authorise multiple agents, how to deal with estimated profits for non-fiscal year-end businesses and the best way to deal with jointly let property all remain unresolved.

Given the issues mentioned here, all of which have arisen since our last report, the compliance costs and burdens associated with MTD ITSA need to be reassessed, especially insofar as they impact on the very smallest businesses. More importantly, we think the whole MTD ITSA project needs to be delayed by at least a year to allow these issues to be properly addressed and resolved before implementation commences.

See Administration Advisory Board 2022 Report

1 July 2022

HMRC have opened a new consultation ‘Tertiary legislation for Making Tax Digital for Income Tax’ inviting views on draft legislation which sets out the requirements for Making Tax Digital (MTD) for Income Tax.

It confirms that landlords and sole traders who must now join MTD from April 2026 but are under the VAT threshold, will only have to submit three line accounts to HMRC.
Those who are over the VAT threshold (£85,000) will have to submit income and expenses by category with property income split between UK and overseas, Furnished Holiday Lets and other types of letting, and FHL's split between UK and EEA holiday let businesses.

September 2021: Update on Making Tax Digital

In an update to Parliament, the Treasury announced that MTD for ITSA will be delayed until April 2024.
General partnerships will not be mandated to join MTD for ITSA until April 2025. The date for all other partnerships is yet to be confirmed.
The new penalty system, due to take effect from April 2023, will also be delayed until April 2024 for MTD for ITSA mandated taxpayers and April 2025 for all other ITSA taxpayers.
In line with the other delays, the proposed changes to basis periods will also move to April 2024, with no transitional rules having effect until 2023 at the earliest.
See: Update on Making Tax Digital

July 2021: Basis period reform

In July 2021, HMRC opened a Consultation that proposes to reform the basis period rules by allocating trading profit to tax years regardless of the business’ accounting period end date. 2022-23 will be a transition year, with profits being reported up to 5 April 2023.
Should this reform go ahead, it is likely that businesses will be mandated into MTD for Income Tax from 6 April 2023, regardless of their accounting period end.
See Basis period reform: What could it mean for MTD?

February 2021: MTD for Income Tax policy update

Via HMRC's Developer Hub, a policy update was issued in early 2021.
All Income Tax taxpayers earning more than £10,000 in business and property income per year will join MTD from April 2023.
- Trusts, estates, trustees of registered pension schemes and non-resident companies will not be included.
- Mixed partnerships, limited partnerships and limited liability partnerships will join at a later date.
Early draft regulations suggest that:
- Separate reports will be required for each type of property business (e.g. Furnished Holiday Lets, long term lets and overseas property businesses).
- Four in-year reports in respect of each business must be made within one month of each business quarter-end.
- A fifth 'end of period statement' will be also be made.

November 2020: MTD proposals for companies

From April 2024 companies can start using a MTD for Corporation Tax (CT) pilot scheme.
From April 2026 companies join MTD for CT.
See Consultation: Making tax digital for companies

July 2020: New timeline announced for Making Tax Digital for Business

VAT-registered businesses with a taxable turnover below £85,000 will be required to follow Making Tax Digital rules for VAT for their first return starting on or after April 2022.
Self-employed businesses and landlords with business turnover above £10,000 will need to follow the rules for MTD for Income Tax from their (current or next account period) following April 2023.
Businesses that cannot go digital will not be required to do so.
Businesses can choose to use spreadsheets to both maintain digital records and perform tax calculations, provided the spreadsheets combine with some form of ‘bridging’ software that will allow their VAT return data to be sent to HMRC from the spreadsheet.
HMRC is going to consult in the Autumn on the detail of extending Making Tax Digital to incorporated businesses with Corporate Tax obligations.

March 2020

As a result of the Coronavirus (COVID-19) the “soft landing period” to implement Making Tax Digital for VAT digital links was extended to 31 March 2021.
Previously there were two start dates, from 1 April 2020, or 1 October 2020 for deferred businesses. Now all businesses will not be required to have digital links between software programs until their first VAT Return period starting on or after 1 April 2021.
See COVID-19: Government support tracker

March 2019

Making Tax Digital for Business: the Chancellor confirmed in his Spring Statement that the government will not be mandating MTD for any new taxes or businesses in 2020.

February 2019

It is currently proposed that VAT-registered businesses trading above the VAT threshold are mandated to file VAT returns by using functional compatible software from April 2019.
The MVD pilot continues to roll out, see MVD pilot: Who can join?
Agents are encouraged to open a new Agent Services Account. There is widespread confusion as the accounts don't do anything yet.
Plans for Making Tax Digital for Self Assessment are on hold.

November 2018

HMRC commenced sending out MVD letters to VAT-registered businesses encouraging them to take up MVD software and register with MVD.
Budget 2018: proposals to introduce a new late interest and late payment points-based penalties system for MVD have been postponed. They were omitted from Finance Bill 2019. It is now anticipated that the new system will be postponed until 2021.

October 2018

HMRC announced that they are allowing the following businesses to defer from the requirements of Making VAT Digital (MVD) until 1 October 2019. See Making VAT Digital: New Timetable.
The MVD pilot was first opened to certain businesses on 16 October 2018. See MVD: When to join the pilot.

July 2018

HMRC Published the results of a number of its different research projects looking at digital services.

HMRC published VAT Notice 700/22: Making Tax Digital for VAT.

Highlights of the notice include the requirement to use 'functional compatible software'.
From 2020 the use of 'copy and paste' is to be banned! Software must electronically link from other bookkeeping records such as spreadsheets into MTD software. This is to allow HMRC to interrogate the underlying records such as the spreadsheet.

Draft Finance Bill 2019 contained proposals for three new tax penalty systems which were dropped following the budget 2018. HMRC have said that they will be included in a future finance bill.

The penalty proposals are:

Late filing: a points-based system, see Penalties: Late submission (MTD).
Late payment: no penalties if tax is paid within 15 days, increased penalties as further time elapses, see Penalties: Late payment (MTD).
Late payment interest supplement (VAT): See VAT Interest harmonisation.

HMRC also published policy papers and this follows consultations: MTD: Sanctions for late submission and payment and consultation, Making Tax Digital: Interest harmonisation and sanctions for late payment.

MTD background

Provisions included in draft Finance Bill 2019 for new penalty systems were dropped in November 2018 and are to be included in a future finance bill.
HMRC consulted on draft secondary and tertiary MTD legislation together with draft guidance on Making Tax Digital for VAT. The consultation closed in November 2017.
Finance (No2) Act 2017 allowed HMRC to introduce MTD via secondary legislation (statutory instrument). The significance is that this form of legislation is not scrutinised by parliament.
On 13 July 2017, the government announced that MTD would be delayed for business until 2020, with the exception of VAT. An updated timetable for MTD:
- 2019: VAT-registered businesses are mandated into MTD with the exception of the digitally excluded.
- 2019/2020: all businesses may try MTD on a voluntary basis.
- 2020: non-VAT registered unincorporated businesses and landlords join MTD.
- 2020+ ?: Companies and Large Partnerships to join MTD.
- Note that the digitally excluded and micro-businesses (t/o <£10,000) are excluded from MTD.
Consultation on new MTD penalties closed on 11 June 2017. The different tax bodies all hold different views of the proposed regimes, see MTD penalties responses compared.
May 2017: the MTD provisions were cut from the Finance (No 2) Bill 2017 due to the decision to call an early general election.
March 2017: draft regulations on MTD to be published during summer 2017.
Andrew Tyrie, chair of the House of Common’s Treasury committee, wrote to the Administrative Burdens Advisory Board concerned that HMRC’s estimate on the cost of Making Tax Digital of £280 is unrealistic. The Federation of Small Business estimates that the cost of adding four extra returns will be three times the annual cost for business.
HMRC commenced a small-scale MTD pilot in April 2017.
The House of Lords Finance Bill sub-committee recommended that HMRC put the brakes on MTD for business: it's being rushed, there's little benefit to government and it creates unnecessary burdens on small business.
In the Spring Budget 2017, it was announced that MTD will be postponed by one year (i.e. to 2019) for those self-employed and landlords who have a turnover under the VAT threshold.
MP Andrew Tyrie who sits on the Economic Committee of the House of Commons stood up following the budget speech to suggest that 'now that the door is ajar...[on MTD],' that perhaps other changes to HMRC's MTD plans could be now considered.
January 2017: HMRC published responses to their consultations:
- ‘Making Tax Digital: Voluntary pay as you go'
- ‘Making Tax Digital: Tax administration’
- 'Bringing business tax into the digital age'
  - Nichola Ross Martin's comments.

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Making Tax Digital: Index & timeline

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