HM Revenue & Customs (HMRC) is pushing ahead with a pilot of Making Tax Digital (MTD) for Income Tax, in a move that may signal what the future holds for self-employed individuals when it comes to completing their tax returns.
The new pilot opens up an existing limited test to all self-employed individuals who wish to take part.
MTD for self-employed individuals will involve submitting quarterly digital returns to HMRC using ‘designated software packages’, as part of the Government’s long-term project to digitise the tax system.
However, following the announcement last year that MTD for taxes other than VAT would be essentially on-hold until after the implementation of MTD for VAT in April 2019, few software developers have invested in support MTD for Income Tax, meaning that just two packages are currently available.
The pilot phase means that self-employed individuals are currently under no obligation to use MTD for Income Tax and are free to continue to make their self-assessment tax returns in the usual way.
However, self-employed individuals with an annual income of £85,000 or more will still need to make arrangements to ensure that they are compliant with the requirements of MTD for VAT in time for next April’s deadline.
It is widely expected that unincorporated landlords will also be invited to take part in the pilot of MTD for Income Tax from next month, similarly enabling them to report to HMRC on a quarterly basis.