Just nine people are taking part in the pilot scheme for rolling out Making Tax Digital to more than 4m self-employed from 2024.
Making Tax Digital for Income Tax (MTD ITSA) will mean 4.3m self-employed and landlords will have to file digital returns from April 2024. Anybody with a combined income of more than £10,000 from self-employment and being a landlord will be brought into the scheme.
Currently the self-employed have to file just one end-of-year tax return but MTD ITSA will involve having to submit updates quarterly every three months. Plus there will be an end-of-year statement plus a “finalisation return” (now called a tax return) each year. This means six reports to HMRC in total replacing the current single annual self-assessment tax return.
On top of which, the self-employed and landlords will have to license accounting software from approved providers, although the Government is currently offering discounts of up to £5,000 for small businesses to rent software.
Emma Rawson, technical officer at the Association of Taxation Technicians, a professional body, said many self-employed she had spoken to were unaware of Making Tax Digital and were “quite horrified to learn they’d have to buy software in a couple of years [to do their taxes]”.
Stuart Miller, product compliance and industry engagement manager at accountancy software provider Xero, told the Financial Times that having just nine people trialling MTD ITSA was too small a number.
“Until there are a significant number of taxpayers included in the pilot, it’s difficult to determine how fully robust the system will be,” he told the newspaper.
Zena Hanks, a partner at Saffery Champness, warned there may be problems when the system goes live if the number of people who have tested it was too small to be representative.