HMRC have announced that the Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) requirements due to be effective for self-employed individuals and landlords from April 2024, will now be delayed until April 2026.
Why has a delay to MTD ITSA been announced?
The announcement was made by Victoria Atkins, financial secretary to the Treasury, in a statement issued on 19th December 2022, following calls from professional bodies and the results of a survey by the Chartered Institute of Taxation (CIOT) and Association of Taxation Technicians (ATT) published on 12th December 2022.
Atkins commented that whilst Making Tax Digital for VAT is already demonstrating the benefits to businesses that digital ways of working can bring, the government understands businesses and self-employed individuals are currently facing a challenging economic environment, and that the transition to MTD for ITSA represents a significant change for taxpayers, their agents, and for HMRC. A two-year delay will allow small businesses and landlords time to understand and implement the tools required to adhere to the MTD ITSA requirements.
What other changes have been made?
Other changes to the MTD ITSA requirements and deadline include:
- Minimum income reporting level has been increased to £50,000.
- Those earning more than £30,000 will be required to join the scheme in 2027.
- The requirements for Landlords and sole traders earning less than £30,000 will be reviewed to see if MTD ITSA can be shaped to meet the needs of smaller businesses.
- Partnerships will not be brought into MTD for ITSA as previously planned in 2025.
- The points-based penalty system will be extended to MTD ITSA filers when they join.
Which details do businesses and property landlords need to report under MTD?
HMRC are currently consulting on the precise details of what needs to be reported each quarter. As expected, it seems the accounting software will need to record and report income and expenditure in the same categories currently used for self-assessment. The main categories are:
- Turnover / gross rents
- Costs of goods sold
- Wages and salaries of employees
- Sub-contractor costs
- Rent, rates, power and insurance
- Repairs and renewals
- Professional fees
- Telephone and other office costs
- Interest on bank and other loans
- Motor and travel expenses.
It’s never too early to comply
Many self-employed individuals and landlords already have the tools in place to adhere to the Making Tax Digital requirements if they are running businesses operating MTD for VAT, or whether in preparation for the original deadline of April 2024. This includes using ‘functional compatible software’ for income tax purposes i.e. a software program, or set of software programs, products or applications that can:
- record and store digital records
- provide HMRC with information and VAT returns from the data held in those digital records
- receive information from HMRC.
If this is the case, you can start to file your tax returns in accordance with the new compliance that will help you to get into a new routine ready for the 2026 deadline.
Let us help you
If you are an unincorporated business or a have a property rental business and would like assistance to ensure your compliance, including if you need a new digital accounting system (there are relatively low-cost software packages specifically designed for property rental businesses), please contact our inhouse Client Digital & Accounts expert, Bradley Allen-McKenna on 0161 905 1801 or you can email firstname.lastname@example.org.