The government plans to postpone the implementation of its Making Tax Digital self-assessment tax system for self-employed and microbusiness owners until April 2026.
Previously, the Treasury planned to force 4.2 million self-employed people and small enterprises to file quarterly Making Tax Digital forms beginning in April 2024.
Only in September 2021 did the Treasury announce that the MTD deadline will be pushed back a year, from April 2023 to 2024.
According to a Times exclusive, the reason is that HMRC computer systems are not ready, despite the fact that Making Tax Digital was initially announced in early 2015.
From April 2026, any self-employed person or micro-business earning more than £10,000 per year will be required to retain digital accounting records and then send quarterly updates to HMRC using new software, rather than the current annual return.
The reason for this is that digital records and software assist in reducing typical errors, ensuring that self-employed and small business owners do not pay too little or too much. MTD decreases the possibility of error by incorporating automation and error checks that aid in accuracy.
However, small business owners who have already enrolled in MTD worry about the time spent completing digital tax returns, as well as the cost of needing to utilise expensive MTD-compliant software, which can only be hired from certified software suppliers.
HMRC believes that extending MTD to the self-employed and small enterprises will aid in the recovery of the £32 billion the taxman believes is unpaid each year – or 5.1% of the country’s yearly tax haul.