Year-end tax planning and going digital

HM Revenue & Customs’ (HMRC’s) Making Tax Digital (MTD) programme is reforming the UK’s tax system by implementing a ‘digital first’ approach to tax filings and interaction with HMRC.

Making Tax Digital

With MTD for VAT now treated as ‘business as usual’, the next tranche of the programme, MTD for income tax (MTD ITSA) was expected to be introduced in 2024. However, this is now deferred, and there will instead be a staggered start for those within the regime, as follows:

• April 2026: Individuals with business and rental income over £50,000 per annum.
• April 2027: Individuals with business and rental income over £30,000 per annum.
• No date is yet set for implementation for individuals with business and rental income under £30,000 and partnerships with only individuals as partners.

This deferral means that for many businesses, and in particular smaller businesses, there is no immediate driver to become MTD-ready. We would suggest that if you are not already using software to keep your business records then it is worth discussing the options with your adviser: there are benefits for many businesses in having digitised records, including making the existing tax return process easier. Even the smallest landlords could benefit from a well-structured spreadsheet to collate their data – and taking any steps towards digitisation now will make the transition to MTD smoother when it comes.

Ultimately, the government’s ambition is to extend MTD to companies and those partnerships with corporate partners, as well as to businesses within income tax. Initially, MTD for corporation tax was pencilled in for 2026, but with the timescale for MTD ITSA extended we expect that this will also be pushed back. Companies, therefore, do not need to take any particular action at present (although again could see wider benefits from improvements to their record-keeping and reporting systems).

You may also be interested in:

• Year-end tax planning for individuals.
• Year-end tax planning for business owners.
• Year-end tax planning for employers and employees.
• Year-end tax planning for property owners.
• Year-end tax planning for overseas individuals.
• Year-end tax planning and tax efficient investments.

This article is published on a general basis for information only and no liability is accepted for errors of fact or opinion it may contain. Professional advice should always be obtained before applying the information to particular circumstances. Tax law is subject to change. This publication represents our understanding of the law and HM Revenue & Customs’ practice as at 1 February 2023. The FCA does not regulate tax advice.