The Treasury has announced that the planned introduction date of Making Tax Digital for Income Tax (MTD ITSA) of 6 April 2024 will now be delayed for 2 years. This was always poised to be the biggest shake up to the tax system since the introduction of self-assessment so it should be no surprise the delay was not the only change announced……..
MTD ITSA will represent a change to the current annual reporting on a self-assessment tax return to that of quarterly reporting to give both the taxpayer and HMRC a clearer picture of how tax liabilities are building over the course of the year. There will be four quarterly submissions each year, along with a final statement at the end of the year which will replace the self-assessment tax return. The submissions will need to be made on Making Tax Digital (MTD) compliant software, in much the same way as the changes that were made to VAT.
The original plan had been for MTD ITSA to apply to the self-employed and landlords with income of over £10,000 – which would have caught the vast majority of landlords. This minimum income level has now been increased five fold to £50,000 as the reporting level for mandatory MTD ITSA filing from 6 April 2026. Those earning over £30,000 are planned to follow a year later and the Treasury has said for everyone else it will consider how the systems can be shaped to meet the needs of smaller businesses.
The Treasury pointed the finger at the “tough economic environment” and allowing businesses “more time to prepare”, but it is widely rumoured that HMRC has not been able to meet the huge challenges of the systems required.
Whilst this delay and change to the minimum income levels will come as a huge relief to a number of the self-employed and landlords, it is important to note it has not been scrapped (not yet anyway) and the Treasury at this time remains committed to bringing in MTD ITSA, at least in some guise. There have been countries around the world that have introduced advanced digital tax systems to move away from annual reporting but this challenge appears to require a Herculean effort to work in what is considered by many to be the second most complicated tax system in the world (if you’re wondering what is considered the most complicated it is India’s, and the UK helped design that!).
What this does mean is that the changes to basis periods will be introduced before MTD ITSA – more on that next month!
With the UK’s ever changing tax system it is important to have tax advisors that remain up to speed, and can help you in navigating the complexities. At Veritons we make sure we incorporate both these changes and the real world factors of the individuals and their businesses into our tax planning and tax advisory. If you’d like to discuss your position at a free discovery meeting with us please do not hesitate to contact us.