MTD for Income Tax has been delayed by one year to April 2024

The introduction of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) has been delayed by one year until April 2024. This change was announced in a Written Statement to Parliament. The reason for the delay was given as a combination of the issues many UK businesses and their representatives are facing as a result of the pandemic as well as feedback from interested parties.

MTD for ITSA will fundamentally change the way businesses, the self-employed and landlords interact with HMRC. The regime will require businesses and individuals to register, file, pay and update their information using an online tax account. From April 2024, the rules will apply to taxpayers who file Income Tax Self-Assessment tax returns with business or property income over £10,000 annually.

General partnerships will not be required to join MTD for ITSA until a year later, in April 2025. The date other types of partnerships will be required to join will be confirmed in the future. The new system of penalties for the late filing and late payment of tax for ITSA will also be aligned with the new MTD dates.

Some businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot to test and develop the MTD for ITSA. The pilot is not affected by the delay and will be extended in 2022-23 in preparation for larger-scale testing in 2023-24. Under the pilot, qualifying landlords and sole traders (or their agents) can use software to keep digital records and send Income Tax updates instead of filing a Self-Assessment tax return.

The MTD regime started in April 2019 for VAT purposes only when businesses with a turnover above the VAT threshold were mandated to keep their records digitally and provide their VAT return information to HMRC using MTD compatible software. From April 2022, MTD will be extended to all VAT registered businesses with turnover below the VAT threshold of £85,000.