Making Tax Digital a little later than planned
The ambitious plans set out by HM Revenue & Customs (HMRC) were hailed as the biggest change to income tax reporting since the introduction of self assessment tax returns in the 1990s. This was set to make the UK “one of the most digitally advanced tax administrations in the world”.
It seems those plans might have been a little too ambitious, however, and in December 2022, changes were made to who will be affected and when.
The rules for those already within the scope of MTD ITSA remain unchanged. In summary, they’ll need to keep digital records of their income and expenses and make quarterly submissions to HMRC as well as an end of period statement to bring in any accounting adjustments for the year.
What has changed is who will be caught by the new rules and when.
HMRC have listened to representations from the accounting industry, where it was felt that the original introduction date of April 2024 didn’t allow enough time for taxpayers to prepare; software providers were still working on their offerings (and HMRC will not be providing their own software). In addition, general awareness of the changes was low, particularly among those with smaller self-employed or rental businesses.
The introduction of MTD ITSA has therefore been delayed for at least two years.
When it’s finally introduced, from April 2026, it will come with a much higher threshold for taking part.
Where it was originally announced that those with a combined turnover of £10,000 or more from relevant sources would be required to participate, this will now start at £50,000 for the first year, falling to £30,000 from April 2027, with further reductions to be considered, depending on how successful the implementation of the new system proves.
Don’t put it off
The delay to MTD ITSA will be a welcome relief for many who no longer fall within its scope, at least for the foreseeable future, and for those who now have an extra two to three years to get ready.
However, that doesn’t mean that you don’t need to think about it for another two years. HMRC’s timescale was always optimistic and the time they have given taxpayers needs to be put to good use.
As a firm, we’re not waiting for the rules to become compulsory before we react to them. We’re already trialling different software to help our clients identify those that best suit their needs. We’re making sure our clients have systems that they’re familiar with and have confidence in before their use becomes mandatory.
MTD-compliant software has many additional benefits to support business owners and landlords in running their businesses and property portfolios.
Sign up to receive the latest news from Larking Gowen