Making Tax Digital for Income Tax delayed by 12 months

Small businesses have been given an additional year to prepare for Making Tax Digital (MTD) for Income Tax.

The new system will require self-employed workers and landlords to complete Self Assessment digitally using MTD-compliant software.

According to HM Revenue & Customs (HMRC), MTD for Income Tax will be delayed until April 2024, a year later than planned.

The move will give the smallest of businesses more time to prepare as they recover from the coronavirus pandemic.

Under the new regime, self-employed business owners and landlords with a taxable turnover above £10,000 will be required to use digital accounting software – such as Xero or QuickBooks – to complete income tax returns.

General partnerships, meanwhile, will not be required to join until April 2025. All other partnerships will be required to join in the future, but a date has yet to be confirmed.

The Government said the new penalty system for late filing and late payment of tax for MTD for Income Tax will also come into effect in the tax year beginning April 2024, and in April 2025 for partnerships.

To prepare, businesses can sign up to the MTD for Income Tax pilot, set to be expanded next year.

Commenting on the delay, Lucy Frazer, Financial Secretary to the Treasury, said: “The digital tax system we are building will be more efficient, make it easier for customers to get tax right, and bring wider benefits in increased productivity.

“But we recognise that, as we emerge from the pandemic, it’s critical that everyone has enough time to prepare for the change, which is why we’re giving people an extra year to do so.

“We remain firmly committed to Making Tax Digital and building a tax system fit for the 21st century.”

More information can be found here.

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Posted in Income Tax, Making Tax Digital, News.