HMRC has announced that the Making Tax Digital (MTD) for unincorporated businesses, self-employed individuals and landlords in the UK will be delayed until April 2026. This delay is due to the difficult economic circumstances that the country is currently going through.
Although this delay may seem like a setback, it can actually be beneficial for small businesses and self-employed individuals and landlords in the long run.
Let us explore how this delay can benefit those affected by it.
What Is Making Tax Digital?
Making Tax Digital (MTD) is a government initiative intended to digitally transform tax administration in the United Kingdom. It was launched in April 2019 and its aim is to make it easier for people to understand, manage and submit their taxes online through digital tools such as software and apps.
MTD requires businesses with an annual turnover above £85,000 to keep records of all their financial activities digitally using software or apps approved by HMRC. The deadline for implementation of this measure was set at April 2024, but due to current economic circumstances, it has been pushed back two years until April 2026.
Benefits of the Delay
The two-year delay of MTD has provided some much-needed breathing space for small businesses and self-employed individuals who are already overwhelmed by the current economic situation.
The extra time gives them more opportunity to adjust their accounting processes and become familiar with new digital tools and systems before they have to start submitting their taxes digitally under MTD guidelines. This should reduce stress levels significantly, as well as allowing them more time to find out exactly what they need to do in order to comply with MTD requirements when it does come into effect in 2026.
Furthermore, delaying the implementation of MTD also allows HMRC more time to develop its digital services further so that they are easier to use when they do eventually launch. This means that taxpayers will have access not only to improved digital services, but also better support from HMRC if they need help with understanding how MTD works or troubleshooting any issues they may encounter while filing their taxes digitally.
Conclusion
In conclusion, although HMRC’s decision to delay Making Tax Digital may appear unfavourable at first glance, it can actually be beneficial for small businesses and self-employed individuals who are already struggling financially due to Covid-19 restrictions and cost-of-living crisis.
The extra two years provides them with more time and flexibility when it comes to adjusting their accounting processes so that they are compliant with any new rules once MTD does come into effect in 2026.
