Although there has already been a delay to the planned start for Making Tax for Income Tax Self Assessment (MTD ITSA), until April 2024, the commencement date is now fixed in legislation to provide increased certainty.

This is not to say there remain many details to be clarified. However, the general timetable is now understood.

In this blog we take a look at some key dates you need to know, including when to send reports, statements and declarations. We discuss the new MTD penalty system, and look at dates for other forms of Making Tax Digital too.

The topics covered are:

• Timeline for the introduction of MTD ITSA
• Timeline for periodic updates for MTD ITSA
• Timeline for basis period reforms
• Timeline for the new MTD penalty point system
• Timeline for the introduction of MTD for Corporation Tax
• Timeline for MTD for VAT
• Who is excluded from MTD ITSA?

Timeline for the introduction of MTD ITSA

In simple terms, the majority of the work required for MTD ITSA will happen prior to April 2024, which is when it begins for sole traders and landlords with income over £10,000. This initial rollout will affect millions of people across the UK.

Here are some specific dates:

• Present time: If they have compatible software, clients have been able to register for the MTD ITSA pilot programme since April 2017, provided they’re a sole trader with income from one business or a landlord who rents out UK property. They must also be UK resident, and be already registered for, and up to date with, Self Assessment. Provided both you and your client have compatible software, you can register them for MTD ITSA using your Agent Services Account.
• April 2023: This is the date from which it’s anticipated most clients will start signing up for MTD ITSA. Accountants will begin in earnest authorising MTD ITSA clients via their Agent Services Account.
• April 2023: This start of the transition year for businesses having to undertake basis period reform.
• April 2024: MTD ITSA becomes a legal requirement for self-employed traders and landlords with gross income over £10,000 per annum.
• April 2024: The start of the new basis period for businesses that had to undertake basis period reform.
• April 2025: MTD ITSA becomes a legal requirement for general partnerships (those comprising only individuals) that earn over £10,000 per annum.

The timetable for more complex partnerships has as yet not been announced. Nor has it been discussed officially when other users of Self Assessment, such as savers and investors, might have to switch over to MTD ITSA.

Allowing clients to both register a year before commencing, and for you to be authorised to deal with MTD ITSA on their behalf, is intended to smooth out the signing-up process, which was much criticised in the roll out of MTD VAT.

Timeline for periodic updates, statements, EOPS and declarations for MTD ITSA

MTD ITSA requires the submission to HMRC of at least quarterly periodic updates, although businesses can provide more frequent updates if it suits their needs.

End of Period Statement (EOPS) will be required to outline final business profits for each trade and landlord income, and a Final Declaration is also due, which will include any other income, gains and reliefs.

The standard dates for submitting updates, statements and declarations are listed below.

Note that the dates listed below for periodic updates include the de facto one-month grace period following the end of that quarter:

• 5 August: Periodic report is due, covering 6 April to 5 July
• 5 November: Periodic report is due, covering 6 July to 5 October
• 31 January: EOPS, Final Declaration and any tax/NIC payments are due for the tax year ended the previous March.  
• 5 February: Periodic report is due, covering 5 October to 5 January
• 5 May: Periodic report is due, covering 6 January to 5 April

Timeline for basis period reforms

Prior to MTD ITSA, accountants are likely to need to assist clients adjust their basis period so that it matches the fiscal year (if it doesn’t already).

This is known as basis period reform.

The key dates are as follows:

• 2022/23: This is the last year for any existing full basis period.
• 2023/24: This is the transitional year when businesses will have to transition to the new fiscal year. In other words, businesses having to undertake basis period reforms will have an unusually long basis period, all the way up to 31 March 2024.
• 2024/25: All sole traders will now have to use the fiscal year for their basis period. In other words, businesses will be taxed only for profits earned in that tax year.

It’s worth remembering that basis period reforms are being introduced because of MTD ITSA, but are not directly linked. All unincorporated businesses, including sole traders and partnerships, will need to ensure they follow the new basis period rules, even if their income falls below the £10,000 threshold for MTD ITSA.

Timeline for the new MTD penalty point system

MTD ITSA effectively introduces a new penalty system whereby points are accrued that can lead to financial penalties.

Here are the key dates:

• 1 January 2023: The new penalty system comes into effect for MTD for VAT for accounting periods beginning after the start of January 2023.
• 6 April 2024: The new penalty system will come into effect for MTD ITSA users alongside the initial rollout of MTD ITSA.
• 6 April 2025: All other Self Assessment users will have the penalty points system apply to them, even if they don’t use MTD.

Timeline for the introduction of MTD for Corporation Tax

A consultation about MTD for Corporation Tax (CT) was completed at the end of 2021.

It mentions the following dates for MTD for CT, but these are by no means certain:

• April 2024: This is the earliest date at which a pilot scheme for MTD for CT might be launched.
• April 2026: This is the earliest date at which MTD for CT could be rolled out.

Timeline for MTD for VAT

Just in case you need it, here’s how MTD for VAT was rolled out, all the way up until April 2022 when it was extended to all VAT-registered businesses:

• October 2018: The MTD for VAT pilot scheme is opened to the public.
• April 2019: MTD for VAT comes into effect for most businesses over the £85,000 threshold.
• October 2019: MTD for VAT is extended to larger businesses that had been deferred in April 2019.
• April 2021: The MTD for VAT soft landing period comes to an end. This had allowed copy/cut and paste as a form of digital linking.
• April 2022: MTD for VAT is extended to all VAT-registered businesses, including those below the £85,000 threshold.

Who is excluded from MTD ITSA?

MTD ITSA currently does not apply to the following as of the April 2024 and April 2025 introduction dates:

• Other types of partnership, including Limited Liability Partnerships (LLPs).
• Trusts and estates.
• Trustees of registered pension schemes.
• Non-resident companies.

It should not be assumed that these entities won’t fall under a similar piece of legislation in the future.

It will probably also be possible for businesses to apply to HMRC for an exemption from MTD for ITSA, as with MTD for VAT at the present time. This is usually because they are digitally excluded.

HMRC lists the following as reasons for digital exclusion and therefore an application for exemption:

• Personal circumstances such as age, a disability, or remoteness of location.
• An individual’s religious beliefs mean you object to using computers.
• To quote HMRC directly: “Any other reason why it’s not reasonable or practical.”

Conclusion: Preparing your firm and your clients

While 2024 seems a long time away, it will soon come around. There are many things to consider in terms of the changes required for both your firm and your clients, and early planning is recommended.

Key considerations around client segmentation, choosing technology, and helping clients make the transition will help ensure that you are on track and that everyone has time to prepare adequately.