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MTD for Income Tax Delayed

In a statement to MPs today, new financial secretary to the Treasury Lucy Frazer has confirmed that the introduction of Making Tax Digital (MTD) for income tax will be delayed by a year.

The quarterly digital reporting for landlords and the self employed was due to start in 2023, but it will be pushed back by 12 months, the second delay to the digitisation programme.

The government recognises the challenges faced by many UK businesses and their representatives as the country emerges from the pandemic over the last year. In recognition of this and of stakeholder feedback, we will now be introducing MTD for ITSA a year later, in the tax year beginning in April 2024,

General partnerships will not be required to join MTD for ITSA until the tax year beginning in April 2025.

The date at which all other types of partnerships will be required to join will be confirmed later.

Penalty Scheme for late filing also affected

This delay will also affect the introduction of the new penalty scheme for late filing and late payment of tax for ITSA. This will now be introduced for those who are mandated for MTD for ITSA in the tax year beginning April 2024, and for all other income tax self assessment customers from April 2025.

Alongside the regulations – statutory instrument – laid in parliament today, HMRC has also published a tax information and impact note (TIIN) setting out the projected benefit and cost impacts of MTD for ITSA, as well as a policy paper to help different businesses understand what their transition to MTD could look like in more detail.

‘A later start for MTD for ITSA provides more time for those required to join to make the necessary preparations and for HMRC to deliver the most robust service possible, affording additional time for testing in the pilot,’

Lucy Frazer – Treasurey

HMRC’s plans

HMRC will continue to work in close partnership with business and accountancy representative bodies and software developers to ensure taxpayers are well supported as they adopt MTD for ITSA.

This delay has also had a knock-on effect on the plans to introduce basis period reporting for the self employed and partnerships, which is currently out for consultation and has come in for some criticism due to the rushed nature of the original time scale, particularly as businesses were recovering from the pandemic.

‘The government has also recently consulted on a reform of the complex basis period rules that govern how self-employed profits are allocated to tax years. Many respondents said that the reform was a sensible simplification but asked for more time to implement the changes.

In recognition of these concerns, these changes will not come into effect before April 2024, with a transition year not coming into effect earlier than 2023. The government will respond to the consultation in due course providing the next steps.

For further advice contact AJR & Co Ltd