How MTD for income tax will shape the digital landscape
9 Sep 2019
By the end of the 2020s, the tax landscape will look very different from the way it is today. And the paper personal tax return should be left dead and buried as a result.
We’re already seeing the signs of change in the months since MTD for VAT was introduced, as more businesses take up cloud technology and we get a hint of how automated tax will work.
In a matter of months, MTD has driven adoption of cloud accounting platforms, according to academic research. In turn, cloud software is the biggest single factor in reshaping the role of accountants and bookkeeping professionals.
As the mists surrounding Brexit begin to lift, HMRC will once again be able to focus on driving forward its MTD agenda. And it’s intention of modernising the finance industry.
By 2030, MTD will be well established for VAT and income tax – possibly for other taxes too.
The next phase of MTD
The next milestone will be MTD for income tax. This could in theory be April 2020 but is almost certainly going to April 2021 at the earliest.
“We should be well on our way to having an automated tax system by the end of the coming decade,” says AAT Chief Executive, Mark Farrar.
“Without the more pressing priorities of Brexit, HMRC would have been …moving towards digital Corporation Tax by now. I think the focus for the 2020s will be to make all of the big ticket taxes digital by the decade’s end, then mop up the smaller taxes after that.”
A lot of the details regarding the requirements remain a bit of mystery. “It’s hard to be convinced we’re going to have a reliable system in place in the short term,” said Sarah Saunders, manager at RSM UK Tax and Accounting.
Not everything can be automated in that timeframe, says Farrar – capital gains tax might not be there. “But certainly, the personal tax return as we know it should be a thing of the past.”