Businesses given more time to prepare for digital tax changes

HMRC has given businesses an extra year to prepare for digital tax changes, with the digitisation of Income Tax now being introduced in April 2024.

The delay in implementing Making Tax Digital for Income Tax comes in response to feedback from businesses and organisations representing them in light of the challenges posed over the past 18 months by the coronavirus pandemic.

The government will now introduce Making Tax Digital for Income Tax Self Assessment in the tax year beginning April 2024. The later start date gives businesses more time to prepare, and for HMRC to deliver a robust service with addition time for pilot customer testing.

Forming part of the government’s ambition to become one of the most digitally advanced tax authorities in the world, Making Tax Digital is the first phase of HMRC’s move towards a modern, digital tax service fit for the 21st century. It supports businesses through their digitalisation journey and provides a digital service that many have come to expect in their everyday lives.

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.”

MTD for Income Tax will now be mandated for businesses and landlords with a business income over £10,000 per annum in the tax year beginning in April 2024.

General partnerships will not be required to join MTD for ITSA until the tax year beginning in April 2025, while the date other types of partnerships will be required to join will be confirmed in the future.

A pilot programme is already underway, and is set to be expanded during the 2022/23 financial year, with a larger scale test in 2023/24.