Share your views on the MTD ITSA regulations
By Chris Campbell, Head of Tax (Tax Practice and Owner Managed Business Taxes)
15 December 2023
Following the Chancellor’s Autumn Statement, we review the new draft regulations for Making Tax Digital for Income Tax Self-Assessment (MTD ITSA).
A review into the needs of smaller unincorporated businesses resulted in no further announcements in the 2023 Autumn Statement, meaning that for the time being, self-employed businesses and landlords with income below £30,000 will not be mandated to do so.
The existing MTD ITSA mandation rules are contained in the Income Tax (Digital Requirements) Regulations 2021. As these refer to the original £10,000 mandation threshold, originally due to take effect form April 2024, these regulations now need to be updated to reflect the announcements over the past year.
New draft regulations
Following the Autumn Statement, the government has published a draft of the Income Tax (Digital Requirements)(Amendment) Regulations 2024 to amend the existing regulations, inviting comments before 12 January 2024.
The main changes relate to the £50,000 income threshold from April 2026 and the £30,000 income threshold from April 2027. Additionally, the inclusion of the exemption for foster carers and taxpayers without a national insurance number (announced in the Autumn Statement), as well as the removal of the end of period statement (EOPS) requirements.
HMRC has also published a draft software notice, joint property owners notice and general notices alongside the new regulations.
Opting in to MTD ITSA if not mandated
From April 2024, we expect there to be wider opportunities than the current tax year for those self-employed businesses and landlords to volunteer to join MTD ITSA earlier than their mandation date. For accountancy practices, it may be useful to select a sample of clients to help test how MTD ITSA will work ahead of it being required for self-employed businesses and landlords with income above £50,000 from April 2026.
Although clause 23 (election to no be exempt) is being removed in the latest regulations, this does not mean that self-employed businesses and landlords with income below £50,000 (April 2026) or £30,000 (April 2027) cannot take part voluntarily. It removes the need to formally elect to do so under the tax legislation.
The requirement for the quarterly returns to be by the 5th of the month after the end of the quarterly reporting period. As VAT registered businesses have a deadline of the 7th of the month for VAT returns, we plan to suggest that the MTD ITSA deadline is aligned with the VAT deadline in the interest of consistency. However, we welcome comments on this or any of the other practical proposals of MTD ITSA.
Let us know your views
While the timing of the deadline is not ideal for tax practitioners involved with self-assessment in the run up to the 31 January 2024 self-assessment deadline, we would welcome any comments from our members for inclusion in the ICAS response.
We would also welcome your views more generally, which help inform our work on consultations or other tax-related matters. ICAS responds to many tax calls for evidence and consultations, as well as producing tax policy papers and reports. We also regularly attend meetings with HMRC at which service levels, delays and other issues are discussed, and we raise problems being encountered by members.
Please email tax@icas.com to share your insights and feedback.
