Making Tax Digital - Update

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In our June blog we told you about HMRC’s plans for Making Tax digital (MTD), the Government’s plan to have all businesses and individuals subject to self-assessment submitting their income and expenses electronically and quarterly by 2020.  We promised to keep you abreast of developments and since our original newsletter HMRC have issued new consultation papers outlining further detail on MTG. 

Here are the key highlights:

  • Quarterly reporting will likely come into effect for accounting periods after April 2018 and will be based on businesses current year-ends.
  • HMRC have suggested that there will be penalties for late filing of documents.
  • An extension of using the cash basis for businesses when calculating profit and loss has been rumoured.  Currently the cash basis is only available to unincorporated businesses under the VAT registration threshold.
  • HMRC has set out options for paying taxes as they arise on a quarterly basis.
  • HMRC will use third party information to populate digital tax accounts with information such as bank interest and pension income.

The introduction of MTD will be a major change for businesses in how they report information to HRMC, and how they pay their taxes.  There are still many unanswered questions for which the accounting community awaits responses, including:

  • How soon will agents have access to the same information available to their clients?
  • Given accounting adjustments included in year-end accounts, how will quarterly reporting of income and expenses be reconciled with annual profits?
  • Will the free software promised by HMRC be adequate for all small businesses or will some have to invest in (and learn to use) accounting software?
  • Will the introduction of more reporting assist with the Government’s aim to improve record-keeping for small businesses?
  • Will provision be made for individuals that do not have access to the internet or a computer?
  • How will individuals data held by HMRC be kept secure?

As we receive answers to these questions we will keep you updated. 
If you have any queries on MTD then we’re here to help.


Making Tax Digital – implementation timeline

With Making Tax Digital (MTD) pushing ahead the Institute of Chartered Accountants in England & Wales (ICAEW) has issued a handy timeline for developments expected over the coming months and years.  Here it is:


July – December 2016

Testing starts for digital reporting of accounts by small businesses.

Bank and building society interest above the personal savings allowance included in tax codes for employees and pensioners.

Authorised agents able to manage their clients’ digital tax accounts.

Testing starts on using real-time information to show taxpayers how their personal allowances are shared between jobs and pensions.


January – June 2017

Testing starts for digital reporting of income from letting property.

New online billing system begins.

Taxpayers able to report additional sources of income through their digital tax account.


July – December 2017

Digital tax accounts show taxpayers an overview of their tax liabilities in one place.

Automatic tax code adjustments prevent PAYE under and overpayments.


January – June 2018

Interest paid by banks and building societies starts to be shown in digital tax accounts.


July – December 2018

Most businesses, self-employed and landlords start updating HMRC quarterly for income tax and National Insurance obligations through their accounting software.

Taxpayers who currently report their Child Benefit to HMRC no longer need to do so.  



Most businesses, self-employed and landlords start updating HMRC quarterly for VAT obligations through their accounting software.

Capital Gains Tax on the disposal of residential properties needs to be paid within 30 days.



Most companies start updating HMRC quarterly for Corporation Tax obligations through their accounting software.

The full range of HMRC services are available through digital tax accounts.