Making Tax Digital (“MTD”) for income tax delayed to 2024 as recommended by Institute

Last week the UK government announced that MTD for income tax self- assessment (“ITSA”) is being delayed one year from April 2023 until April 2024. Basis period reform is also delayed one year and transitional measures will not now commence until April 2023 at the earliest. Both of these delays are in recognition of the challenges faced by many UK businesses as the country emerges from the pandemic. Chartered Accountants Ireland wrote at the end of last month to HM Treasury calling for basis period reform and MTD for ITSA to each be delayed at least one year - the Institute’s input into the Government’s decision to defer is acknowledged in a letter from the new Financial Secretary to the Treasury, the RT Hon. Lucy Frazer who also made a statement in Parliament confirming the decision.

The delay to both of these measures is welcomed and demonstrates that the Government has listened to the recommendations of this Institute and other stakeholders.

As a result of the delay to MTD for income tax, general partnerships will not be required to join MTD for ITSA until April 2025. The date at which all other types of partnerships will be required to join will be confirmed later.

Regulations have been laid in Parliament setting out the design and scope of MTD for ITSA and a Tax Information and Impact Note has also been published in addition to a Policy Paper designed to help different businesses understand what their transition to MTD could look like in more detail.

In addition, changes to the basis period rules will not come into effect before 2023/24. This was also a recommendation of the Institute in its response to that consultation. The Government’s response to that consultation will be published in due course.

At Spring Budget, the Government announced a new system of penalties for the late filing and late payment of tax for ITSA. This will now be introduced for those who are mandated for MTD for ITSA in April 2024, and for all other ITSA taxpayers in April 2025.

A news release covering last week’s announcement is also available. HMRC has also updated a number of relevant publications as follows:-

• Making Tax Digital for Income Tax for businesses: step by step;
• Check if you're eligible for Making Tax Digital for Income Tax;
• Making Tax Digital for Business - stakeholder communications pack;
• Customer costs and benefits for the next phases of Making Tax Digital;
• Check when to sign up for Making Tax Digital for Income Tax;
• Find software that's compatible with Making Tax Digital for Income Tax;
• Apply for an exemption from Making Tax Digital for Income Tax;
• Using Making Tax Digital for Income Tax; and
• Extension of Making Tax Digital for Income Tax Self-Assessment to businesses and landlords