14th October, 2021, Marina Watters
Making Tax Digital delay: HMRC has announced that there will be a delay to the start of Making Tax Digital for Income Tax Self-Assessment.
In this article, Marina Watters ACCA analyses some of the information arising from that announcement, highlighting the key points that businesses and individuals need to know.
What are the implications of the Making Tax Digital delay?
The mandatory introduction of Making Tax Digital for Income Tax for sole trader businesses and landlords with gross business income over £10,000 per annum will now begin in the tax year beginning in April 2024. General partnerships will not be required to join Making Tax Digital for Income Tax until the tax year beginning in April 2025, while the date other types of partnerships will be required to join will be confirmed in the future.
The Treasury have said that this extension has been granted in recognition of the impact of the pandemic on individuals and businesses.
The announcement means that the new system of penalties for the late filing and late payment of tax, legislated for in Finance Act 2021, will also be delayed.
What other tax changes are afoot?
There is speculation that the wording that has been used, ‘in the tax year beginning in April 2024 etc.’, may be because HMRC are considering moving the start of the tax year to 1 April - following the recent publication of an OTS Report ‘The UK tax year end date: exploring the potential for change’.
The report examines in detail the costs, benefits, and practicalities of moving to a 31 March end of tax year (in overview terms also looks at a 31 December alternative). There are strong arguments for the move to reduce the administrative burden of Making Tax Digital for Income Tax, particularly for those who are both property landlords and self- employed.
The announcement also confirms that reform of the basis period rules, originally timetabled for 2022/23, will also be delayed. It now appears that changes will not come into effect for any businesses before April 2024, with a transition year not coming into effect earlier than tax year 2023/24.
All businesses which were in existence immediately before April 2023 (‘existing businesses’) will join Maxing Tax Digital for Income Tax from 6 April 2024. This is a big change from previous drafts of the regulations, where the start date for a business was linked to their accounting period.
Another big change from previous proposals is that all businesses will have to provide quarterly updates for the same periods, by the same deadline, regardless of their accounting period.
Whilst we now have extra time to prepare for Making Tax Digital, it’s important that we don’t lose momentum – April 2024 will still come round sooner than you might think!
Related pages: Making Tax Digital