Image of a device using cloud accounting software to represent Making Tax Digital for ITSA | Randall & Payne

New VAT penalty regime delayed to January 2023

A new, and arguably fairer, system for determining penalties for late returns and late payment of VAT was due to be introduced from April 2022.

However, it has been recently announced that the start has been delayed until January 2023. The same system will also apply to returns under Making Tax Digital for income tax and those penalties will now start in April 2024.

Under the new regime taxpayers will accumulate points for late submissions, and only after reaching a certain threshold will an automatic penalty be imposed. The threshold will depend on how regularly the taxpayer is required to submit a return.

Reminder of key dates for the roll out of Making Tax Digital:

Making Tax Digital for VAT

Businesses need to have signed up to Making Tax Digital for their first VAT return starting on or after 1 April 2022. They may not be required to make their first submission via Making Tax Digital until Summer 2022.

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Making Tax Digital for Income Tax

The government is extending the requirement to operate Making Tax Digital to the 4.2m taxpayers with business and/or property income over £10,000, including landlords, sole traders and partnerships, for their Income Tax obligations.

These changes will apply to businesses, self-employed individuals and landlords who are chargeable to Income Tax from April 2024.

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