HMRC has set out to implement a transformed tax system that will see the end of the tax return as we know it. With the introduction of Making Tax Digital, businesses will benefit from accounting that is more effective, efficient and simpler.
The new tax system will form part of the government’s ambition to become one of the most digitally advanced tax authorities in the world. It will support businesses through their digitalisation journey, providing a digital service that we have all become so used to in many other aspects of our lives.
While MTD promises to be a positive change that many businesses are excited about, there is plenty to prepare for. But don’t worry. the Government have recognised the challenges faced by many UK businesses due to the pandemic and have made timely adjustments.
The government will now introduce Making Tax Digital for Income Tax Self Assessment (ITSA) a year later than planned, in the tax year beginning in April 2024.
Allowing businesses more time to prepare will make the process easier for everyone. HMRC will have gained the time to implement an even more robust system for MTD to start on, benefiting from additional customer testing time in the process.
MTD for Income Tax will now be mandated for businesses and landlords with a business income over £10,000 per annum in the tax year beginning in April 2024.
General partnerships will not be required to join MTD for ITSA until the tax year beginning in April 2025, while the date other types of partnerships will be required to join will be confirmed in the future.
In March 2021, the government announced a new, fairer penalty system for late filing and late payment of tax for ITSA. The new penalty system for those who are mandated for MTD for ITSA will now come into effect in the tax year beginning in April 2024, and in the tax year beginning in April 2025 for all other ITSA taxpayers.
For many businesses, moving into digital accounting will be a natural next step. There is evidence to show that businesses currently operating MTD are experiencing wider benefits and reductions in input errors.
Eligible businesses and landlords can start gaining the benefits early by signing up for the pilot. The MTD pilot is underway and will be expanded during the 2022 to 2023 tax year, ready for larger-scale testing in the 2023 to 2024 tax year.
Collaboration with tax professionals and customers has been key in the development of MTD and HMRC has worked closely with partners in the business and tax communities on the proposed design and scope of MTD for ITSA.
The laying of regulations today sets out the technical details of how MTD for ITSA will work, and its new launch date – giving certainty to businesses.
Moving into digital accounting can be an easy and exciting process, but you may be looking for advice along the way to make sure your business is compliant.
We have supported hundreds of businesses that made the switch. In fact, every new business we have registered and helped to get started has been plugged straight into the digital system, just as we did when Whyfield began over 7 years ago!
Let us take any concerns you have and make your move to Making Tax Digital the exciting process we know it to be. Learn all about our digital accounting training and how your business can start enjoying the benefits.