Breaking tax news this afternoon 23rd September 2021
Making Tax Digital for Income Tax – the requirement to keep records digitally, and submit quarterly tax returns – has been postponed from April 2023 to April 2024.
This recognises that a lot more work is required by HMRC and Taxpayers to be ready for this change which is the most significant overhaul to Tax Administration for a generation, and, arguably, more significant than the 1997 transition to Self Assessment.
As a recap MTD for IT will apply to:
– Sole traders with a turnover of over £10,000 – from April 2024 now
– Landlords with rental income of over £10,000 – from April 2024 now
– Partnerships with turnover of over £10,000 – a year later, April 2025
Under MTD for IT, mandated taxpayers must:
– keep their records digitally via either an program/app or an spreadsheet with a electronic link to HMRC
– submit quarterly tax updates – effectively a mini tax return
– submit an end of year update for business and/or property income (“End of Period Statement”)
– submit an overall end of year tax reconciliation (“Crystallisation Statement”) – but alas called “Final Declaration” in later HMRC Guidance
The extra twelve months provides some breathing space, but do be aware that this is still a major set of changes that need advance preparation. Businesses and Landlords should be thinking about digitisation now, and how they will be complying.