It was back in 2015 that the then Chancellor, George Osborne, proposed a modernisation of the UK tax systems with his plans to introduce Making Tax Digital (MTD). Thus, there was significant expectation around the announcement made yesterday afternoon which was hailed as the next big step in its introduction.

Given the reality that the project has been beset by technical issues and associated delays, it was no surprise that the written statement announced the main part of the proposal, dubbed MTD ITSA, is to be further deferred and will not be introduced until the year ended 5 April 2025.

MTD progress so far

Whilst most VAT registered businesses have got used to accounting under MTD over the past couple of years, expanding this more generally to cover income tax, and in particular the self-employed and landlords, was to be the next important phase in bringing millions more taxpayers into MTD.

Also deferred is the new associated penalty regime, which will now also commence in April 2024 for those mandated into MTD ITSA and from April 2025 for all other taxpayers filing under self-assessment.

In addition, the announcement also commented that the far more recent proposal, being just suggested a couple of months ago, to change the income tax basis of assessment to a tax year end has, unsurprisingly, also been now deferred at least until 2024/25.

‘The Government recognises the challenges faced by many UK businesses and their representatives as the country emerges from the pandemic over the last year. In recognition of this and of stakeholder feedback, we will now be introducing MTD for ITSA a year later, in the tax year beginning in April 2024.‘

Lucy Frazer, The Financial Secretary to the Treasury

Accountants generally have been saying the whole MTD project, so reliant on appropriate software and IT integration, is being rushed, and it appears the Government is taking action in accordance with those concerns.

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