HMRC has announced that businesses will have an extra year to prepare for the digitalisation of Income Tax, with Making Tax Digital for Income Tax Self Assessment now due to be introduced in April 2024.

What has been announced?

Having listened to stakeholder feedback, and recognising the challenges faced by many UK businesses  as the country emerges from the COVID-19 pandemic, the Government will now introduce Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) a year later than planned.

MTD for ITSA will now be mandated for businesses and landlords with a business income over £10,000 per annum in the tax year beginning in April 2024.

General partnerships will be required to join MTD for ITSA in the tax year beginning in April 2025. The date for other types of partnerships will be confirmed in due course.

In March 2021, the government announced a new, fairer system of penalties for the late filing and late payment of tax for ITSA. The new penalty system for those who are mandated for MTD for ITSA will now come into effect in the tax year beginning in April 2024, and in the tax year beginning in April 2025 for all other ITSA taxpayers.

Eligible businesses and landlords can sign up to take part in the MTD pilot, gaining the benefits of MTD early. The pilot, which is already underway, will be gradually expanded during the 2022 to 2023 tax year, and larger scale testing will take place in the 2023 to 2024 tax year.

MTD – the background

Making Tax Digital is the first phase of HMRC’s move towards a modern, digital tax service fit for the 21st century, and forms part of the Government’s ambition to become one of the most digitally advanced tax authorities in the world.

Throughout the development of MTD, HMRC has worked closely with tax professionals and partners in the business community on the proposed design and scope of MTD for ITSA. For many businesses, MTD will be natural extension of the way they already operate. As technology becomes ever more prevalent in our daily lives, and more and more businesses recognise the benefits that technology can bring to their operations, MTD provides a digital service that many have come to expect. Evidence shows that many businesses currently working with MTD are already experiencing wider benefits and reductions in input errors.

This later start for MTD for ITSA allows more time to prepare for  those required to join, as well as giving HMRC additional time for pilot testing so it can deliver a more robust service. 

What do I need to do?

Although the new dates may still seem like a long time away, we recommend businesses start their digital journey as soon as possible.

HMRC has issued regulations setting out the technical details of how MTD for ITSA will work. What we have learnt from MTD for VAT is that the early adopters to a digital way of working found that wider benefits were gained to help make their business more efficient, competitive and profitable, while providing a compliant solution to the legislation well in advance of the deadline. It’s important not to underestimate the time to select, implement and train your team; becoming comfortable with the digital solution in advance of the deadline will also minimise any last-minute concerns and avoid any potential penalties. Our digital experts can help you throughout your digital journey.

HMRC will continue to work closely with business and accountancy representative bodies, as well as software developers, to ensure businesses and individuals are well supported as they adopt MTD for ITSA.

We’re here to help

We’ve been helping businesses of all sizes prepare for MTD for some time now and if you’ve not considered this yet, it’s not too late to start planning now. If you’re unsure where to start, please do not hesitate to get in touch with your usual Johnston Carmichael contact or me, Ewan Bolt.