Digitized income tax will not require paid software for “straightforward tax matters”, minister says


The government is confident that small businesses and individuals with “straightforward tax matters” will not have to pay for software as part of the digitization of income tax self-assessments.

After several delays – including a recent decision to postpone implementation for another year – HM Revenue and Customs’ Making Tax Digital program is set to finally expand to cover self-assessment tax payments. income (ITSA) in April 2024. Self-employed, small businesses and owners registered with ITSA and generating annual business or property income above £ 10,000 must by then switch to the online system .

This requires the use of compatible software; There are currently seven that have been approved by HMRC, three of which offer a free version. Five more are currently in development.

By way of comparison, the Making Tax Digital for VAT system, in effect since 2019, offers users a choice of more than 500 certified compatible tools, including 21 free options.

Government Minister for Efficiency and Transformation Lord Theodore Agnew said that “HMRC expects as competitive a market for MTD for income tax self-assessment” as the one that is is developed for VAT payments.

“HMRC works closely with the software industry to ensure that companies have access to products that fit their budgets and needs,” he said. “The introduction of Making Tax Digital for VAT has created a competitive software market. Many companies that used subscription accounting software before MTD have had their products upgraded for free to MTD compatibility. Several free and low-cost software products are available.

The minister added that for the digitization of income tax, people with simple needs should be able to switch to the online system without having to pay for new software products or subscriptions.

“The government remains committed to working with software vendors to ensure that there are free income tax self-assessment software products for businesses with straightforward tax matters,” he said. -he adds.

Of the seven software applications currently approved for the new digital ITSA regime, two are designed only for use by businesses or individuals themselves, while one is specifically intended for professional tax agents working on behalf of clients. The other four can be used by companies or their designated agents.

Individuals and businesses making self-assessed payments have until April 6, 2024 to switch to the online system, while the deadline for general partnerships is April 2025. More complex partnership models will follow at a later date. moment – not yet specified – thereafter. .

Agnew’s comments were made in response to a written parliamentary question from Lord Taylor of Warwick, an unaffiliated life peer.

Sam Trendall is editor-in-chief of PublicTechnology, where a version of this story first appeared.

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