The Treasury has announced that Making Tax Digital for income tax self assessment (MTD for ITSA) will be delayed for two more years until April 2026.

MTD for ITSA was due to take effect from April 2024 and would have required all self-employed individuals and landlords with income over £10,000 to report earnings quarterly through the MTD for ITSA system.

However, in a Written Statement, Victoria Atkins, Financial Secretary to the Treasury, confirmed that the mandation of MTD for ITSA will now be introduced from April 2026. Businesses, self-employed individuals and landlords with income over £50,000 will be required to join first. From April 2027, those with income over £30,000 will be mandated to join, the Treasury said.

Ms Atkins said:

‘The government understands businesses and self-employed individuals are currently facing a challenging economic environment, and that the transition to MTD for ITSA represents a significant change for taxpayers, their agents and for HMRC.

‘That means it is right to take the time needed to work together to maximise those benefits of MTD for small business by implementing gradually.’

The Treasury said that the government now intends to review the needs of smaller businesses in regard to MTD for ITSA, and will consider how the initiative can be shaped to meet their needs.

Once the review is finalised, the government will outline plans for any further mandation of MTD for ITSA.

The Treasury also stated that the government will not extend MTD for ITSA to general partnerships in 2025, saying that the government ‘remains committed to introducing MTD for ITSA for partnerships at a later date‘.

Internet link: UK Parliament website

Tax non-compliance during the pandemic cost the UK government £9 billion, according to a report from the National Audit Office (NAO).

HMRC redeployed around 1,350 workers to Covid-19 support schemes throughout 2020/21, shrinking the number of those working on tax compliance, the NAO said.

This reduced the tax authority’s capacity to investigate people and businesses not paying the correct levels of tax, according to the NAO.

Before the pandemic, tax revenues from HMRC’s compliance work were on average 5.2% of its total revenues. This dropped to 4.2% between 2020 and 2022 causing a £9 billion reduction in revenues.

Gareth Davies, Head of the NAO, said:

‘HMRC had to move swiftly to reallocate resources to Covid-19 schemes, as the circumstances of the pandemic demanded. However, this directly affected its ability to investigate cases of people and businesses not paying the right tax.

‘There is now a risk that more people ultimately fail to pay the right tax or escape investigation or prosecution. It is concerning that HMRC’s planning indicates that non-compliance may grow following the pandemic. The next two years are critical, and swift action is likely to be needed to stem potential losses.

‘There is little doubt that HMRC’s compliance work offers good value for money, but it needs to evaluate its performance more consistently. Improving the effectiveness of HMRC’s compliance work can help maximise the amount of money available for public services in a challenging economic context.’

Internet link: NAO website

The Mortgage Guarantee Scheme will be extended by a year to the end of December 2023, helping people with 5% deposits on to the property ladder, the UK government has announced.

Under the scheme, the government offers lenders the financial guarantees they need to provide mortgages that cover the other 95%, subject to the usual affordability checks, on a house worth up to £600,000.

Launched in April 2021, the scheme has already helped over 24,000 households. It was originally planned to close at the end of this year but will now be extended until the end of 2023.
Chief Secretary to the Treasury, John Glen MP, said:

‘For hard-working families facing today’s challenging economic conditions, it’s right that we continue to help them secure their first home or move into their dream house.

‘Extending this scheme means thousands more have the chance to benefit, and supports the market as we navigate through these difficult times.’

Internet link: HM Treasury website

Chancellor Jeremy Hunt has announced that the Spring Budget will be delivered on 15 March 2023.

Mr Hunt stated that he has commissioned the Office for Budget Responsibility (OBR) to prepare an economic forecast to accompany the Budget.

The Spring Budget will be the Chancellor’s second fiscal event, following November’s Autumn Statement. Mr Hunt used the Statement to reverse many of the tax cuts announced by his predecessor, Kwasi Kwarteng.

Internet links: UK Parliament website

The Bank of England (BoE) has raised UK interest rates by half a percentage point to 3.5%.

It is the ninth consecutive increase and takes the base rate to its highest level for 14 years as the Bank battles to stem soaring prices.

The Bank’s Monetary Policy Committee (MPC) voted 6-3 in favour of putting rates up by 0.5%. The BoE also warned that further increases may be necessary to tackle what it fears may be persistent domestic inflationary pressures from prices and wages.

Commenting on the rise, Alpesh Paleja, Lead Economist at the Confederation of British Industry (CBI), said:

‘Another big interest rate rise from the BoE doesn’t come as a surprise in the face of historically high inflation.

‘However, with global price pressures starting to wane along with the economy set to fall into recession, it is likely that we’ll see smaller interest rate rises for the foreseeable future. Nonetheless, high inflation and weakening activity will continue into 2023, putting strain on many households and businesses.’

Internet link: Bank of England website