MTD Income Tax Self Assessment Rollout Due in April 2023
HMRC’s £1.3 billion Making Tax Digital programme is due to step up a gear in April 2023, with the rollout of Making Tax Digital for Income Tax Self Assessment (MTD ITSA). This follows the success of the rollout for VAT in 2019. The latest MTD rollout will impact on those who pay income tax via Self Assessment and may eventually mean the end of the traditional tax return. David Redfern, tax preparation specialist and director of DSR Tax Refunds Ltd, explains the latest MTD rollout and what it means for taxpayers.
HMRC has committed to becoming a modern digital system working close to real time and began its move towards full digitisation in April 2019 with its MTD for VAT rollout for VAT customers. The rollout saw 1.4 million VAT customers, including 300,000 who voluntarily signed up, move towards quarterly digital VAT returns. The latest rollout, MTD ITSA, is aimed at beginning the process of digitising the income tax system. Redfern explained “HMRC’s Making Tax Digital programme is aimed at bringing the benefits of digitisation to individuals, businesses and the economy as a whole, by moving towards a more real-time method for accounting for and paying tax which in theory should make it easier for taxpayers to pay the correct amount of tax whilst ensuring that the economy benefits from those tax receipts in real time. MTD for VAT has been a pretty successful rollout so it is no surprise that HMRC is furthering that programme by looking at income tax”. Avoidable Self Assessment mistakes currently cost the Exchequer almost £8.5 billion a year
MTD for ITSA will commence from 6th April 2023 and will initially impact sole traders and landlords with an income greater than £10,000. Those who fall within the scheme will be required to keep digital tax records and provide that information to HMRC on a quarterly basis. Redfern stated “The current system requires Self Assessment taxpayers to provide their income and tax information to HMRC on an annual basis so this will be a big change for some taxpayers and will require them to invest in systems to allow them to provide their tax information digitally. Not all Self Assessment taxpayers are initially impacted by the April 2023 rollout – the first phase only affects sole traders, landlords and those taxpayers who are in a general business partnership. As things currently stand, this initial rollout won’t impact those who use the Self Assessment system to claim tax relief on work-related expenses or trustees although they may be brought into the MTD system at a later date”. Trusts, estates and trustees of pension schemes will not be required to partake in MTD ITSA in April 2023. Non-resident companies will also not be eligible for the initial rollout.
The MTD ITSA rollout has not been without criticism with the £10,000 MTD ITSA threshold coming in for particular censure. It was criticised by a cross-party Treasury Select Committee in 2017 with the consensus being that the threshold had been set too low. Redfern explained “The fact that the threshold has been set below the Personal Allowance threshold of £12,750, means that those taxpayers who have no tax liability due to their income being below that allowance will still be required to register for MTD, invest in suitable systems and report their tax status to HMRC despite them not having tax to pay which makes little sense – a more sensible threshold would have been to peg it to the personal allowance threshold, meaning that both individuals and HMRC are not forced into an unnecessary bureaucratic burden”. Sole traders and landlords who will be eligible for MTD ITSA in April 2023 are being invited to voluntarily enrol early in order to test the system.
Taxpayers who are eligible to claim a tax refund as a result of their work-related expenses are encouraged to contact DSR Tax Refunds Ltd on 0115 795 0232 or via their website in order to progress their claim. Employees who claim a tax refund through the Self Assessment system are currently unaffected by the MTD ITSA rollout.
About DSR Tax Refunds Ltd
DSR Tax Refunds Ltd is a firm of tax preparation experts who specialise in CIS tax returns for construction workers working within the Construction Industry Scheme (CIS) as well as employees who are eligible to claim a tax refund for their work-related expenses, including employees working from home as a result of the Covid19 pandemic. Their friendly and helpful team can help with all relevant paperwork to ensure clients claims are handled in an accurate and efficient manner.
For more about DSR Tax Refunds Ltd, visit https://tax-refunds.co.uk/
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DSR Tax Refunds Ltd
Registered Office: Ground Floor, Seven Mile House, 1 Mansfield Road, Papplewick, Nottingham, NG15 8FJ