The move towards a digital tax system was first announced in
the 2015 Budget, with a timeline said to be implemented from April 2018.

Several changes to the implementation timeline have been
made since 2015, most recently in the Spring Statement 2019 it was announced
that the government will not be mandating MTD for any new taxes or businesses
in 2020.  Therefore, MTD for income tax will now not be mandated until
2021 at the earliest.

It is worth noting that the government remains committed to
the modernisation of the tax system with MTD so MTD for income tax will still
be implemented, the commencement date has just been delayed.

Unincorporated business and landlords with turnover below
the VAT registration threshold (currently £85,000) have the option to take part
in a pilot scheme to use software to send income tax updates online, rather
than completing a Self Assessment return. However, a Self Assessment tax return
will still be required where there are additional sources of income (e.g.
second trade, interest, dividends). 

The income tax updates are required in four quarterly
updates, as well as an end of period statement to confirm the results of the
trade or property business. An end of tax year declaration would also need to
be submitted to confirm total income, this remains due by 31 January following
the end of the tax year. Overall, for a taxpayer with just one trade, six submissions
would be required each year.

Anyone taking part in the MTD for income tax pilot will be
able to see, each quarter as they update their account, an estimate of tax that
may be payable at the end of the tax year. This may help with cashflow planning
and ensuring enough income is retained for the tax payment due at the end of
the year. The deadlines for tax payments remain unchanged, but it is possible
when using the pilot to pay tax on a ‘pay as you go’ basis if preferred.

The MTD for income tax pilot is available to sole traders
with income from one business, and those renting out UK property (not furnished
holiday lettings).

Participation in the pilot is voluntary and therefore
penalties will not be levied for late quarterly reports. HMRC have in fact not
yet specified any deadlines for the submission of the quarterly reports.

In conclusion, the main advantages of taking part in the MTD
for income tax pilot now is being more prepared for the time when the regime
becomes mandatory and having greater visibility with regards to the income tax
liability during the year.

If you have any questions on Making Tax Digital, quarterly
returns or the future of the tax return then do get in touch via email (info@shawgibbs.com) or call 01865 292 200.