Making Tax Digital (MTD) may have been kicked into the long grass for millions of self-employed – but does it postpone the digitisation of practitioners’ clients?
After weeks of rumour and conjecture, the government yesterday announced that major tranches of MTD would be pushed back.
The self-employed and landlords with an income of more than £50,000 will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software from April 2026, rather than April 2024.
Those with income between £30,000 and £50,000 will need to do so from April 2027, while a review will be held to consider how to deal with those below £30,000. The ‘partnerships’ introduction from April 2025 has been indefinitely postponed.
Financial secretary to the Treasury Victoria Atkins said: “It is important to ensure this works for everyone: taxpayers, tax agents, software developers, as well as HMRC.”
Reaction to the further delays has been mixed. Some have welcomed the delay, citing HMRC as not being ready and the smallest businesses avoiding having five returns to file a year rather than one.
Paul Falvey, a tax partner at BDO, said: “The lack of available software and pilot testing meant it wasn’t viable for this project to launch as planned in 2024,” said Falvey.
However, Praveen Gupta, partner & national head of tax at Azets, said that the medium-term postponement only prolonged “uncertainty”.
“Confirmation of the government’s decision to further delay the introduction of Making Tax Digital only adds to the unrelenting uncertainty faced by SME business owners and entrepreneurs over the two years, at a time when much needed stability has been promised,” said Gupta.
While Gupta notes that the MTD project has been “chaotic”, he is concerned that small businesses will simply stop digitising their operations, urging them to continue.
“Our advice to business owners is to continue with digitalisation plans, despite the potential for further delays.
“Adopting accounting technology has enormous benefits in that it provides critical real time information, and doing so well in advance of MTD coming into effect will help you smooth the process before it becomes mandatory.”
Drive awareness, keep digitising
FreeAgent CEO Roan Lavery said there was “no way that everyone affected” would have been ready for the previous deadlines, and HMRC must work much harder to drive its MTD communication efforts.
“Many developers and software vendors have been working hard in recent years to ensure that their products – and their customers – are ready for MTD, but it’s clear that more needs to be done to raise wider public awareness about the changes,” said Lavery.
“We cannot just keep kicking the can down the road, otherwise the same issues will reappear in a couple of years’ time. There needs to be a concerted effort to ensure that everyone who will be impacted by the Making Tax Digital reforms is properly prepared.”
Speaking on LinkedIn, Sage director of product marketing Chris Downing said the delay would “frustrate” accountants and bookkeepers who had put in time and effort to digitise their firm and clients.
He said that MTD was “no longer the primary catalyst” for practice/client digitisation.
“Now is the perfect time to continue digitising the firm and encourage clients to adopt digital solutions to gain greater visibility of financial performance and make informed decisions based on real time information,” said Downing.
“Furthermore, embracing the right technology can improve operational resilience, increase efficiency and streamline workflows across the practice to free up time for higher value work or support clients who may be resistant to change.”
