The government announced last week that Making Tax Digital (MTD) for income tax has been delayed by one year, and will now take effect from April 2024. The reason for the delay was due to the government recognising the challenges already facing UK businesses and individuals as the country starts to emerge from the COVID-19 pandemic.

Whilst this is a further delay, having originally planned to commence in April 2018, the government has once again reiterated that this is just a delay and that the move to a more digitalised tax system will happen.

Timescale Changes

Prior to the announcements last week, MTD for income tax was to apply to individuals and partnerships who have self-employment and/or rental (UK & foreign) gross income in excess of £10,000. The individuals/partnerships who exceeded the threshold would have been required to keep digital records and to file quarterly submissions along with an end of period statement from April 2023.

Following last week’s announcement, individuals will now need to comply from the tax year beginning 6 April 2024 with general partnerships complying from 6 April 2025. There was no update on when limited partnerships and limited liability partnerships may fall into MTD, nor was there any changes to the gross income threshold.

Penalty Regime

The announcement means that the new penalty system for the late filing and payment of tax for income tax will also be delayed. This means that for those who file under MTD, the new penalty regime will now come into effect from April 2024, and for those who continue to file under Self-Assessment from April 2025. Details of the changes to the penalty regime (prior to the above changes) is available here.

Basis Period Reform

Along with a delay to the new penalty regime the government has also confirmed that this has had a knock on effect on the plans to align self-employed and partnerships basis periods with the tax year, and that these changes will now not come into effect prior to April 2024. Please note that this potential change is still in the consultation stage to which the government will provide an update in due course.

Even with the delay to MTD, now is a good time to prepare for the more digitalised tax system of the future. To ensure you are ready please consider the following:

• Set up a separate bank account for your trading or rental income and expenses
• Talk to your usual haysmacintyre contact about digital bookkeeping or record keeping
• Start collating your income, expenditure and other tax information on a real time basis now, rather than waiting until April 2024

For more details about MTD or any of the above, please contact Alfie O’Dell or your usual haysmacintyre contact.