HMRC pushes digital tax deadline for businesses

HM Revenue and Customs (HMRC) has pushed the deadline for transitioning to Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) back a year. It will now come into effect in April 2024.

The move comes in response to feedback from businesses that voiced concerns about coping with the tax system changes while dealing with the ongoing challenges posed by the COVID-19 pandemic.

Making Tax Digital is the first phase of HMRC's move towards a modern, digital tax service. 

MTD first launched for those with taxable turnover above the VAT threshold of £85,000 per annum in April 2019. Since that time, HMRC reported that over 1.5 million businesses have signed up, including a number of VAT-registered businesses that have joined voluntarily.

VAT-registered businesses with taxable turnover below the threshold still need to have joined MTD for their first tax return from April 2022.

The deadline change relates to businesses and landlords with businesses or property income over £10,000 per annum who are liable for income tax. They were set to transition to MTD for ITSA from April 2023.

Lucy Frazer, Financial Secretary to the Treasury, said that while the system would ultimately make filing their tax returns more efficient, the government understood that making the transition while many firms are facing pandemic hardships would put undue strain on business owners.

“We recognise that, as we emerge from the pandemic, it’s critical that everyone has enough time to prepare for the change, which is why we’re giving people an extra year to do so,” Ms Frazer said.

“We remain firmly committed to Making Tax Digital and building a tax system fit for the 21st century,” she added.

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.