Making Tax Digital for Income Tax Self Assessment deferred – Yet Again!

By Kathryn Gigg Chartered Accountants, Hunstanton

In an unexpected, but welcome, announcement, and despite repeated statements to the contrary since the last deferral in September 2021 HMRC, confirmed on 19 December 2022 that the implementation of Making Tax Digital for Income Tax (MTDITSA) will not now become mandatory until 5 April 2026, rather than 2024 as previously stated (or indeed the 2020 start as envisaged in 2015 when the process was first announced!).

Even better news is that the new regime of quarterly submissions will initially only apply to businesses and landlords with turnover in excess of £50,000. Those businesses turning over between £30,000 and £50,000 will have a further year, until April 2027, to prepare for the new rules. There will also be a “review into the needs of smaller businesses” – so whilst these are not entirely ruled out for the future, one can assume that implementation will not take place for at least three more years. No date has been given for the extension of the rules to general partnerships, other than that it will not now be 2025, as previously planned.

It is unclear exactly what has given rise to this change of heart, although likely causes might be:

• Continuing uncertainties with the interaction between MTD and PAYE for those with multiple sources of income.
• Problems in the early trials of the system
• Lack of public engagement, particularly among smaller businesses and landlords, and those with a limited range of IT skills
• Lack of available free software and inability of some software packages to deal with more complex MTD scenarios
• The fear that introducing a major change in a period of “challenging economic environment” might cause economic damage as some smaller businesses decide to close or accelerate retirement plans rather than comply.

It seems unlikely that the project will be abandoned, since too much cost and effort has already been expended, and the more likely course of events is that taxpayers will, over the next few years, be encouraged into early adoption, with the aim of ironing out all the problem areas before entry become mandatory. One might even guess that by 2026/27 the proportion of “aged and disengaged” taxpayers will be that much smaller so implementation and enforcement will be less difficult.

Whilst the issue will move into the background for the time being, businesses now have a strictly defined and achievable date to introduce digital systems and ensure they are in good working order by the time MTD really does happen.

Please contact either myself or my partner Nicola Tarry FCA on 01485 534800 or email kate@kathryngigg.co.uk if you require any advice regarding digitising your accounting records and any concerns about MTDITSA.

Mrs K H Gigg FCA N.B. Article written in January 2023