THE GOVERNMENT HAS announced a further delay to the introduction of Making Tax Digital for Income Tax Self-Assessment, the government’s attempt to fully digitise the tax return sphere.
What is Making Tax Digital for Income Tax and why is there a delay? In today’s Shipleys Tax blog we look at the next step in the UK government’s master plan of the much vaunted “digital tax revolution”.
What is Making Tax Digital for Income Tax Self-Assessment?
This is essentially a personal tax reporting process designed to ultimately replace the current annual Self-Assessment tax return dubbed Making Tax Digital for Income Tax (MTD for ITSA).
Under MTD for ITSA, it is proposed that businesses, self-employed individuals and landlords will need to:
- keep digital records (much for like VAT records currently),
- send quarterly summary of their business income and expenses to HMRC using MTD-compatible software, and
- file quarterly estimated tax calculations based on the information provided to help them budget for their tax.
This is essentially a personal tax reporting process designed to ultimately replace the current annual Self-Assessment tax return dubbed Making Tax Digital for Income Tax (MTD for ITSA).
At the end of the year, they can make adjustments to finalise their tax affairs using MTD-compatible software. This will replace the need for a Self Assessment tax return. Clearly, not the simple overhaul the government would have us believe.
So what was the original plan?
Before today’s announcement, MTD for ITSA was mandated from April 2024 for taxpayers with a total gross income over £10,000 from self-employment and property in a tax year.
And now?
In a statement released on 19 December, the government finally acknowledged that MTD ITSA is a significant change for all concerned, and that launching a much criticised process during an economic crisis is not really the best thing to do. As such the plans have been revised as follows:
- MTD for ITSA will now be delayed until April 2026, with the self-employed and landlords with turnover in excess of £50,000 joining first.
- Those with income over £30,000 but not exceeding £50,000 will not need to join until April 2027.
- A start date for general partnerships has not yet been announced.
The government will also now review the needs of smaller businesses before asking those earning less than £30,000 to join.
Given the expected additional costs and administrative burden for small businesses this will undoubtedly be a very welcome change. However, HMRC will have its work cut out when operating different systems for self-assessment customers so further delays could well be on the cards.
If you are affected by any of the issues above and would like more information, please call 0114 272 4984 or email info@shipleystax.com.
Please note that Shipleys Tax do not give free advice by email or telephone.
