Some of you will be breathing a sigh of relief after today's announcement that forthcoming changes to the tax system are to be deferred.
Making Tax Digital for Income Tax – the requirement to keep records digitally, and submit quarterly returns – has been postponed from April 2023 to April 2024.
This is in recognition that a lot more work is required by both HMRC and taxpayers to be ready for this change which is the most significant overhaul to the tax system since the introduction of Self Assessment in 1996.
As a recap MTD for IT will apply to:
– Sole traders with a turnover of over £10,000 – now from April 2024
– Landlords with rental income of over £10,000 – now from April 2024
– Partnerships with turnover of over £10,000 – a year later, April 2025
Under MTD for IT, these taxpayers must:
– keep their records digitally via either a program or a spreadsheet with an electronic link to HMRC
– submit quarterly updates - effectively a mini 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 (''Final Declaration'').
The extra twelve months provides some breathing space, but businesses and landlords should still be thinking about digitisation now, and how they will be complying.