Following the news HMRC has just released their announcement that the Making Tax Digital for Income Tax Self-Assessment (ITSA) will be delayed from 2024 until 2026, The Accountant proceeded to collect a number of reactions coming from both the public and private sectors.
The first of these comes from Victoria Atkins MP, currently serving as financial secretary to The Treasury. In her statement, Atkins said:
“Across the globe, digitalisation of tax is increasingly the norm. Modernisation of UK businesses and the tax system remains of crucial importance to the UK. Making Tax Digital (MTD) for VAT is already demonstrating the benefits to businesses that digital ways of working can bring. MTD for Income Tax Self-Assessment (ITSA) will follow, with businesses, self-employed individuals, and landlords keeping digital records and using MTD-compatible software to submit updates to HM Revenue and Customs.”
“The government understands businesses and self-employed individuals are currently facing a challenging economic environment, and that the transition to MTD for ITSA represents a significant change for taxpayers, their agents, and for HMRC. That means it is right to take the time needed to work together to maximise those benefits of MTD for small business by implementing gradually.”
“The government is therefore announcing more time to prepare, so that all businesses, self-employed individuals, and landlords within scope of MTD for Income Tax, but particularly those with the smallest incomes, can adapt to the new ways of working. The mandation of MTD for ITSA will now be introduced from April 2026, with businesses, self-employed individuals, and landlords with income over £50,000 mandated to join first. Those with income over £30,000 will be mandated from April 2027.”
“The government will now review the needs of smaller businesses, and particularly those under the £30,000 threshold. This will look in detail at whether and how the MTD for ITSA service can be shaped to meet the needs of smaller businesses and the best way for them to fulfil their Income Tax obligations. Once that review is complete – and in consultation with businesses, taxpayers, agents, and others – the government will lay out the plans for any further mandation of MTD for ITSA. Following the phased approach, the government will not extend MTD for ITSA to general partnerships in 2025. It remains committed to introducing MTD for ITSA to partnerships at a later date.”
“The new penalty system, harmonising late submission and late payment penalties for Income Tax Self-Assessment with those for VAT, will come into effect for taxpayers when they become mandated to join MTD. This makes penalties fairer and simpler for taxpayers. The government will introduce the new penalty system for Income Tax Self-Assessment taxpayers outside the scope of MTD after its introduction for MTD taxpayers. The government anticipates that most taxpayers within the scope of MTD for ITSA will be able to sign-up voluntarily before they are mandated to do so. HMRC will keep this under review to ensure all taxpayers using the MTD for ITSA service receive a high-quality service.”
In the private sphere, The Accountant was in contact with the IRIS Software Group, a global provider of software which services more than 23,000 UK accountancy firms (including 91 of the top 100 UK firms) and is the largest 3rd party tax filer with HMRC. Jim Scott, MD for accountancy at IRIS, pointed out that this announcement is disappointment, for businesses and individuals throughout the country need clarity.
In his statement, Scott said:
“News of the Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) delay is disappointing. We must have clarity for the industry, businesses and individuals.”
“Stalling this legislation has implications for businesses, agents, accountancy firms and vendors alike. Suppliers have been trying to help HMRC execute MTD by building it into their apps and making sure it serves the market. There are also new vendors coming into the market with MTD products who are banking on this for commercial success. And, of course, accountancy professionals are not only receiving many questions from their customers but need to prepare their businesses.
“We cannot continue with these delays. HMRC must find time to complete their work and not prolong MTD with false starts.
“There must be clarity from the Government for all involved, including where the responsibilities lie in the process. MTD is a huge change in how we submit our taxes, and HMRC is not providing information transparently.
“Finally, HMRC must educate the market. This country has a problem with productivity, so they should be encouraging the use of tech, and quite frankly, the way this is being handled is disincentivising businesses. Digitisation is not a dirty word and we need certainty in this precarious economic environment.
“The benefits of digitising stretch far beyond MTD; in the current environment, being agile and having real-time insights are crucial to making the right decisions.”
We will update this piece as more reactions come in.