Tax Office

Category: tax

Following on the feedback from landlord and accountancy groups, the government has decided to delay the deadline for implementing the Making Tax Digital initiative.

What is Making Tax digital?

Making Tax Digital aims to reduce the gap in tax owed versus the tax paid to HMRC, by implementing a digital system for tax records, and getting updates every quarter.

Why is MTD being delayed?

HM Treasury has released the following statement explaining the 2-year delay:

“Understanding that self-employed individuals and landlords are currently facing a challenging economic environment, and the transition to Making Tax Digital for Income Tax Self-Assessment (ITSA) represents a significant change to taxpayers and HMRC for how self-employment and property income is reported, the government is giving a longer period to prepare for MTD.

“The mandatory use of software is therefore being phased in from April 2026, rather than April 2024.

"From April 2026, self-employed individuals and landlords with an income of more than £50,000 will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software.

“Those with an income of between £30,000 and £50,000 will need to do this from April 2027. Most cus-tomers will be able to join voluntarily beforehand meaning they can eliminate common errors and save time managing their tax affairs.”

Financial Secretary to the Treasury, Victoria Atkins, said:

“It is right to take the time to work together to maximise the benefits of Making Tax Digital for small busi-nesses by implementing the change gradually. It is important to ensure this works for everyone: taxpayers, tax agents, software developers, as well as HMRC.”

Chief Executive and First Permanent Secretary at HM Revenue and Customs, Jim Harra, further added:

“HMRC remains committed to the delivery of Making Tax Digital as a critical part of our strategy for digitalis-ing and modernising the tax system, but we want to make sure we get this right and deliver it effectively.

“A phased approach to mandating MTD for Income Tax will allow us to work together with our partners to make sure that our self-employed and landlord customers can make the most of the opportunities this will bring.

“The announcement relates to MTD for ITSA only. Making Tax Digital for VAT has already been implemented and is demonstrating the benefits to businesses and the tax system of digital ways of working.”

The most important aspect of the tax change is that it will have a significant impact on how self-employed and property income is reported to HMRC.

It is good news for landlords that the government has recognized, that the move to Making Tax Digital for Income Tax Self-Assessment will be a massive change for the majority of affected taxpayers, so the breathing room to prepare will likely be welcome.

Landlords will have additional two years to make adjustments.

The deadline for the 2021-22 Self-Assessment Tax Return is, however, just days away and must be submitted by 31st January 2023.