Many small businesses may have lost track of MTD, which has been introduced five times already. What did the Autumn Statement 2023 say about MTD?
The Autumn Statement 2023 included the outcome of the Making Tax Digital Small Business Review. The review focused on whether and how small businesses should be brought into MTD. So, what were the findings of the review, and what’s next?
Simplifying the process of MTD (ITSA).
The main feedback received from the review was that Making Tax Digital (MTD) needs to be simplified for smaller businesses. Consequently, some design modifications were implemented and announced as part of the Autumn Statement.
Starting from April 2026, Making Tax Digital (MTD) for Income Tax and Self-Assessment (ITSA) will be implemented. This means that you will need to submit a summary report of your income and expenses to HMRC every quarter. The Autumn Statement has now eliminated the requirement for a fifth return.
Instead of submitting figures for each three months, the quarterly updates will now be a cumulative total of income and expenses for the entire tax year. This means that if an amendment is needed, there will be no need to resubmit quarterly updates. This will be a huge relief for many.
April 2026 will be the mandated date for those self-employed and landlords with turnover of £50,000 and more. Those with a turnover of more than £30,000 will be obliged to comply from April 2027.
The government will keep under review the decision to mandate businesses and landlords with income below £30,000.
Scrapping the End of Period Statement (EOPS)
The submission of the End of Period Statement (EOPS) could have been overwhelming.
Initially, it seemed that the four quarterly updates would have to include all the necessary accounting and tax adjustments and claims for any allowances or reliefs for your business or property income.
After all that, you’d make an EOPS for each source of business income, confirming everything’s correct and complete for the year.
Then, there was one more step: a final declaration, which was thought to be like the current Income Tax Return. This is where you’d present your finalised income position across all sources.
The review found that many considered the EOPS requirement confusing, and a bit redundant. This was because it would duplicate a lot of the information in the final declaration.
As a result, the completion of an EOPS is no longer a requirement. The idea is that MTD-compatible software should cover most of what the EOPS was supposed to do.
Are there any exemptions from MTD
Some exemptions from MTD (Making Tax Digital) were also announced:
- Foster carers have been deemed not to see the benefit of being mandated.
- Those without a National Insurance (NI) Number will also be exempt.
It can be difficult to use HMRC’s digital services without a National Insurance Number. However, it’s important to note that this may not be a permanent issue. If you’re currently without an NI Number but expect to obtain one in the future, you’ll still need to comply with Making Tax Digital (MTD) once you have it.
What changes were announced for landlords?
The property sector, particularly landlords, will be the most affected by the next wave of MTD. The Autumn Statement has announced changes that will affect those who jointly own letting properties.
MTD will be a headache for most jointly-owned property landlords because they will have to calculate their share of income and expenses every quarter and then exchange all these transaction details with the other owner. This will require a lot of extra work.
However, the government is now making things easier. Landlords can now choose to skip submitting quarterly updates on expenses for jointly owned properties. This means less paperwork throughout the year, and the records will be included in the final declaration.
Announcements for us agents
It is common for businesses to have two agents, such as a bookkeeper and an accountant, especially with increased reporting requirements.
Currently, HMRC’s online system allows only one agent to manage a client’s tax affairs for each type of tax. However, with the implementation of Making Tax Digital (MTD), this setup may not be sufficient for everyone. Some clients may require one agent to handle quarterly updates, while another agent takes care of year-end and final declarations.
The Government plans to allow multiple agents to work on one client’s MTD requirements, making the process smoother and more flexible. It has committed to developing a solution that works for the taxpayer.
The Autumn Statement 2023 contained some promising announcements. The simplification measures proposed have been well-received by most accounting and tax bodies.
However, there are still concerns about whether HMRC can successfully implement the Making Tax Digital (MTD) initiative, which will bring significant changes to our tax system.
The Public Accounts Committee (PAC) says it thinks HMRC has “lost sight of needing to put the customers at the heart of changes to the tax system”. They have asked HMRC to provide evidence on how MTD will work for taxpayers and the public purse. More information will be available in January 2024.
And of course, let’s not forget we’ve got a likely general election in 2024, which could change the roadmap again. So we need to wait and see what happens next.
If you are working with us, we will provide you with our full support throughout the process. We are currently waiting for confirmation on whether MTD will be implemented in 2026. Hopefully, we should know next year. Once we know we’ll be in touch with you.
If you still have questions just get in touch with your normal manager. If you are not yet working with us but would like to know more about us, have a look at how we can help you with your tax
If you want to know more about the full Small Business Review, details can be found here