Government confirms another delay for Making Tax Digital for Income Tax Self-Assessment
)
Posted: Mon 19th Dec 2022
The introduction of new income tax rules which require businesses to submit quarterly digital updates to the government has been delayed until April 2026.
As part of the Making Tax Digital (MTD) initiative, MTD for Income Tax Self-Assessment (MTD for ITSA) originally planned to require self-employed individuals, business owners and landlords with an income of over £10,000 to keep digital records and submit updates to HM Revenue & Customs (HMRC) every three months, instead of one annual tax return.
It was first due to come into force in April 2023 but in September 2021, the change was delayed until April 2024 due to the impact of the coronavirus pandemic.
Today, Victoria Atkins, financial secretary to the Treasury, announced another delay until April 2026 for those with an income over £50,000 and April 2027 for those with an income over £30,000.
In a written statement to Parliament, Atkins said:
"The government understands businesses and self-employed individuals are currently facing a challenging economic environment, and that the transition to MTD for ITSA represents a significant change for taxpayers, their agents, and for HMRC.
"That means it is right to take the time needed to work together to maximise those benefits of MTD for small business by implementing gradually.
"The government is therefore announcing more time to prepare, so that all businesses, self-employed individuals, and landlords within scope of MTD for Income Tax, but particularly those with the smallest incomes, can adapt to the new ways of working."
For businesses and landlords with an income below £30,000 Atkins said the government will launch an review into how MTD for ITSA "can be shaped to meet the needs of smaller businesses and the best way for them to fulfil their income tax obligations".
Enterprise Nation's reaction to the delay
Enterprise Nation has previously called for the April 2024 introduction of MTD for ITSA to go ahead.
In our Growth Plan, which Enterprise Nation founder Emma Jones personally delivered to small business minister Kevin Hollinrake, we said:
"We believe this will support small businesses to more easily adopt digital tools and manage money."
Responding to the delayed introduction of the rules, Emma Jones said:
"The digitalisation of small businesses is vital for improved productivity and while Making Tax Digital for Income Tax Self-Assessment was set to force many through the pain barrier, the longer-term gains and broader benefits were felt to be an investment.
"It would also bring the UK in line with other OECD countries where it helps with complicated EU VAT regulations. We must see progress on this."
Victoria Atkins' full statement
Across the globe, digitalisation of tax is increasingly the norm. Modernisation of UK businesses and the tax system remains of crucial importance to the UK.
Making Tax Digital (MTD) for VAT is already demonstrating the benefits to businesses that digital ways of working can bring.
MTD for Income Tax Self-Assessment (ITSA) will follow, with businesses, self-employed individuals, and landlords keeping digital records and using MTD-compatible software to submit updates to HM Revenue and Customs.
The government understands businesses and self-employed individuals are currently facing a challenging economic environment, and that the transition to MTD for ITSA represents a significant change for taxpayers, their agents, and for HMRC.
That means it is right to take the time needed to work together to maximise those benefits of MTD for small business by implementing gradually.
The government is therefore announcing more time to prepare, so that all businesses, self-employed individuals, and landlords within scope of MTD for Income Tax, but particularly those with the smallest incomes, can adapt to the new ways of working.
The mandation of MTD for ITSA will now be introduced from April 2026, with businesses, self-employed individuals, and landlords with income over £50,000 mandated to join first.
Those with income over £30,000 will be mandated from April 2027.
The government will now review the needs of smaller businesses, and particularly those under the £30,000 threshold. This will look in detail at whether and how the MTD for ITSA service can be shaped to meet the needs of smaller businesses and the best way for them to fulfil their Income Tax obligations. Once that review is complete - and in consultation with businesses, taxpayers, agents, and others - the government will lay out the plans for any further mandation of MTD for ITSA.
Following the phased approach, the government will not extend MTD for ITSA to general partnerships in 2025. It remains committed to introducing MTD for ITSA to partnerships at a later date.
The new penalty system, harmonising late submission and late payment penalties for Income Tax Self-Assessment with those for VAT, will come into effect for taxpayers when they become mandated to join MTD. This makes penalties fairer and simpler for taxpayers. The government will introduce the new penalty system for Income Tax Self-Assessment taxpayers outside the scope of MTD after its introduction for MTD taxpayers.
The government anticipates that most taxpayers within the scope of MTD for ITSA will be able to sign-up voluntarily before they are mandated to do so. HMRC will keep this under review to ensure all taxpayers using the MTD for ITSA service receive a high-quality service.
You might also like…
