More than a third of HMRC-approved software for Making Tax Digital (MTD) is not capable of handling end-of-year tax returns despite a looming deadline for landlords and sole traders.
The Government lists compatible software that landlords and the self-employed earning more than £50,000 must choose from to report quarterly updates and an end-of-year tax return as part of rules introduced in April.
However, out of 138 software products available to self-employed workers, 51 lacked the ability to do both, with end-of-year tax return functions showing as either “in development” or “not included”, according to analysis by property management platform LetCompliance.
For landlord-specific software, 44 of 128 compatible products did not have the full range of tools.
Experts warned that the tools’ lack of functionality would mean more complexity for taxpayers caught in the MTD net.
MTD for income tax is part of the Government’s attempt to modernise the tax system by mandating digital submissions via approved software. The programme has been criticised for adding unnecessary red tape and pushing up costs.
Under the new rules, sole traders and landlords with qualifying income of £50,000 or more must start filing details of their income and expenses four times a year to HMRC, in addition to their annual tax return – which will be replaced with a “final declaration”.
They are faced with strict deadlines to record quarterly earnings and expenses. The first was by Aug 7, with the next due by Nov 7. The income threshold will fall to £30,000 from next spring, adding more than a million taxpayers to the 864,000 already affected by the changes.
