MAKING TAX DIGITAL FOR INCOME TAX: BUSINESSES AND LANDLORDS GET AN ADDITIONAL YEAR TO PREPARE
Released On 30th Sep 2021
Businesses will now get an additional year to prepare for the Income Tax digital changes, as revealed by HM Revenue and Customs (HMRC).
Acknowledging the challenges faced by many UK businesses during the pandemic, the Government will now launch Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) in the tax year beginning April 2024, rather than 2023.
What you need to know
The self-employed and landlords with a business income over £10,000 per annum will now need to follow the MTD rules from 6 April 2024.
It will not be necessary for general partnerships to join MTD for ITSA until the tax year beginning in April 2025, while more complex partnerships and Limited Liability Partnerships will be required to join at a future date to be confirmed.
A new system of penalties for late filing and late payment of tax is also being introduced alongside MTD. The start date for this is also delayed until the 2024/25 tax year for those mandated for MTD ITSA from that date and from 2025/26 for all other ITSA taxpayers.
The delay of MTD ITSA will allow for a fuller pilot programme. This is already underway and will be increasingly expanded during the 2022/23 tax year, preparing for a greater scale of testing in the 2023/24 tax year.
What will you need?
It’s vital that businesses use ‘functional compatible software’ to meet the new requirements, such as a software program or set of compatible software programs which can connect to HMRC systems via its Application Programming Interface (API).
The software must be able to:
- Keep records in a digital form
- Preserve digital records in a digital form
- Send updates to HRMC on a quarterly basis
Many of the existing cloud accounting platforms that we offer are able to fulfil these roles and have been designed with MTD in mind.
Will you be prepared?
MTD is the first step of HMRC’s shift towards an innovative, digital tax service, supporting businesses through their digitalisation journey in the ever-evolving modern world.
Lyndsay Hardwick, Business Innovation Manager said “This is the latest in a number of delays and deferrals in the MTD programme, where Brexit and Covid have obviously had an impact, but it does make it very confusing for businesses to keep up with their requirements to HMRC.
“I would advise our clients to move to Cloud Accounting Software where possible, to be prepared for the changes when they do come – moreover there are usually always other benefits and efficiencies to be had in the meantime.
“Our Business Innovation team has been helping many finance teams and business owner-managers to get ready for upcoming changes in plenty of time and we’re seeing great results, such as real time access to accounting data, which allows our clients to be better informed about their business and their cashflow position.”
For help and advice on related matters, contact our expert team today.