Making Tax Digital for ITSA delay

Date posted: 21st Dec 2022

The Treasury has announced that Making Tax Digital for income tax self-assessment (MTD for ITSA) will be delayed for two more years, giving affected businesses longer to prepare.

By Ian Jarvis, partner, Clive Owen Managed Services

On Monday 19th December, Victoria Atkins, Financial Secretary to the Treasury, released a ministerial statement setting out adjustments to the scope and timing phases of MTD for ITSA.

This is the third time the reforms have been delayed with many taxpayers still having limited awareness of the reforms. The scheme, first announced in 2015, was originally designed to increase efficiency and reduce fraud and requires quarterly rather than annual reporting.

She stated that the government ‘understands businesses and self-employed individuals are currently facing a challenging economic environment, and that the transition to MTD for ITSA represents a significant change for taxpayers, their agents and for HMRC’.

It will now be introduced from April 2026, with businesses, self-employed individuals, and landlords with income over £50,000 required to join first. Then, from April 2027, those with income over £30,000 will be too. Most customers will be able to join voluntarily beforehand meaning they can eliminate common errors and save time managing their tax affairs.

The government has also announced a review into the needs of smaller businesses, and particularly those under the £30,000 income threshold. The review will consider how MTD for ITSA can be shaped to meet the needs of these smaller businesses and the best way for them to fulfil their Income Tax obligations.

The review will also inform the approach for any further roll out of MTD for ITSA after April 2027.

Mandation of MTD for ITSA will not be extended to general partnerships in 2025 as previously announced. The government remains committed to introducing MTD for ITSA to partnerships in line with its vision set out in the government’s tax administration strategy.

I feel it’s a good sign that HMRC want to make sure the reforms are as effective as possible and the delay will allow businesses more time to prepare, which is positive news.

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