In response to concerns from businesses struggling to emerge from the impact of the COVID-19 pandemic, the UK government has pushed back by a year the digitalisation of income tax.

It means that Making Tax Digital (MTD) for income tax self-assessment will now be introduced on 6 April 2024, rather than on 6 April 2023.

Applying to sole traders with income above £10,000, it will require users to effectively submit a tax return using computer software to HMRC every quarter.

General partnerships will not be required to join MTD until April 2025.

Tax year

In addition, plans to move all sole traders and partnerships over to a tax year basis in 2023 have also been pushed back to 2024. Government estimates are that 93% of sole traders and 67% of partnerships draw up accounts to either 31 March or 5 April.

However, for those who submit accounts to a different end date, the move to a tax year will potentially bring forward tax liabilities during a transition year, now expected to be 2023/2024.

VAT

However, while government has listened to feedback around tax changes, it is continuing with the roll-out of MTD for VAT.

All VAT registered businesses are required to sign up from 1 April 2022, and use a compatible software package or other software including spreadsheets, to connect to HMRC systems.

MTD for VAT was first launched for those with taxable turnover above the VAT threshold (£85,000 per annum) in April 2019.

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