A recent HMRC press release confirmed that sole traders and buy-to-let property businesses (but not incorporated businesses) will have an extra year to prepare for the digitalisation of Income Tax.
Recognising the challenges faced by many UK businesses and their representatives as the country emerges from the pandemic, and having listened to stakeholder feedback, the government will introduce Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) a year later than planned, in the tax year beginning in April 2024.
A later start for MTD for ITSA gives those required to join more time to prepare and for HMRC to deliver a robust service, with additional time for customer testing in the pilot.
We also suspect that the delay will give HMRC’s under pressure staff more time to make the necessary changes to their IT systems and fully beta test their MTD ITSA processes.
Making Tax Digital for Income Tax will be mandated for sole traders and landlords with a business income over £10,000 per annum in the tax year beginning in April 2024.
General partnerships will not be required to join MTD for ITSA 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.
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.
This major change in the taxation of affected sole traders and landlords is thus deferred for a further twelve months.
However, we recommend that all mandated business owners and landlords who presently record their accounting details manually or on rudimentary spreadsheets, give urgent attention to adopting an approved digital accounts software that will be fit for purpose when the new implementation date arrives, April 2024.
We can help. Call now so we can assist with the choice and implementation of suitable software. As well as providing you with the means to comply with the new MTD ITSA requirements, using an appropriate accounts software package will also provide you with access to real-time data, information that can only help as we steer a path through present challenges.
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