HMRC has recently launched a Making Tax Digital (MTD) pilot for income tax for self-employed taxpayers. This is currently open to sole traders with income from only one business, whose current accounting period ends after 5 April 2018.
To take part in the pilot, sole traders will need to send income and expenses summaries to HMRC every three months using MTD-compliant software. A final report to confirm all income and expenses for the year and to claim any allowances or relief the business may be entitled to will also be required.
Currently, only two software providers are included on the list of those that support the MTD for income tax pilot. This can be found on HMRC’s website – https://www.gov.uk/guidance/software-for-sending-income-tax-updates, and will be updated as more become available.
Making Tax Digital for income tax is not set to take effect until 2020: the government has confirmed that keeping digital records and making quarterly updates will not be compulsory for taxes other than VAT before April 2020.
Meanwhile, the Making Tax Digital for VAT pilot starts next month, before being mandated from April 2019.