Making Tax Digital for Income Tax Self-Assessment
New timetable: After pressure from the accounting industry the government has caved in and delayed the start of Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) by a year to allow businesses more time to prepare (see The next step ). This means sole traders and anyone with property rental income of more than £10,000 per year will not be required to use MTD ITSA until 6 April 2024.
Partnerships: General and limited liability partnerships which only have individuals as partners and don’t include companies or other entities will start MTD a year later in April 2025. Other types of partnerships, for example those with corporate partners, will also be required to adopt MTD ITSA but at a date that’s yet to be specified.
Same start date: While MTD ITSA is delayed, the wording of HMRC’s policy paper suggests it will start with a big bang. In other words, it won’t follow the staggered pattern for MTD for VAT, with each business starting from their first accounting period on or after the start date. Instead, every business will begin at the same time, whether that’s April 2024 for sole traders and property rental businesses or April 2025 for partnerships.
Penalties: A side-effect of the delay is that the new penalty regime will be pushed back. This was set for April 2023 but won’t now start until April 2024 for the first group to adopt MTD ITSA and April 2025 for partnerships.
Basis period reform: The government is finalising the reform to income tax basis periods but has also announced that the start of this is being put back. It says that the change now won’t come into effect before 6 April 2024 and therefore the transitional year, which could have triggered higher tax bills for the self-employed, will not be before 2023/24.