HMRC says it has recognised the challenges faced by many UK businesses and their representatives as the country emerges from the pandemic.
As a result of the Covid-19 challenges the government will introduce Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) a year later than planned, in the tax year beginning in April 2024 (rather than 2023).
A later start for MTD for ITSA gives those required to join more time to prepare and extra time for HMRC to do customer pilot testing.
MTD for ITSA will be mandated for businesses and landlords with a business income over £10,000 per annum in the tax year beginning in April 2024.
Making Tax Digital (MTD) was first launched for those with taxable turnover above the VAT threshold (£85,000 per annum) in April 2019. Since MTD for VAT was launched over 1.5m businesses have signed up, including a number of VAT-registered businesses that have joined voluntarily.
VAT-registered businesses with taxable turnover below the threshold need to have joined MTD for their first tax return from April 2022. Over 30% of these customers have already signed up voluntarily, HMRC says.
As part of the 2020 announcement, the government set out that it would be extending MTD to businesses and landlords with business and / or property income over £10,000 per annum that are liable for Income Tax from April 2023. This has now been extended to April 2024.
General partnerships will not be required to join MTD for ITSA until the tax year beginning in April 2025, while the date other types of partnerships will be required to join will be confirmed in the future.
Lucy Frazer, Financial Secretary to the Treasury, said: “The digital tax system we are building will be more efficient, make it easier for customers to get tax right, and bring wider benefits in increased productivity.
“But we recognise that, as we emerge from the pandemic, it’s critical that everyone has enough time to prepare for the change, which is why we’re giving people an extra year to do so.”
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