HM Revenue and Customs (HMRC) have announced that its initiative Making Tax Digital (MTD) for Income Tax Self Assessment will be introduced a year later than planned, in 2024.

MTD is an umbrella term for major digitisation of the UK tax system, and was introduced in 2019 for VAT returns for businesses with a taxable turnover of more than £85,000, with a planned scope of automation expanding into other areas such as income tax self-assessments (ITSA).

It was introduced as a means for businesses and individuals to reduce errors that can lead to over- or underpayment, and reduce tax evasion once reports go fully digital.

With HMRC’s latest changes announced, MTD for income tax will be mandated for landlords and businesses with a yearly business income of over £10,000 in the tax year commencing April 2024.

Businesses within the scope will need to keep digital records and use software to update HMRC quarterly, through MTD software.

The challenges faced by many UK companies following the pandemic, as well as stakeholder feedback, were among the factors prompting the decision to shift the implementation date for MTD for ITSA once again, according to the government.

HMRC said that the later start date for MTD for ITSA will allow those required to join the system more time to prepare and for the taxman to deliver a robust service, with additional time for customer testing of the pilot scheme.

According to HMRC, around 1.5 million businesses have signed up for MTD since 2019.

Lucy Frazer, the financial secretary to the Treasury, said: “The digital tax system we are building will be more efficient, make it easier for customers to get tax right, and bring wider benefits in increased productivity

“But 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.”

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