January 2023

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MTD for ITSA delayed for two more years

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.

The Treasury also 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.

Tax non-compliance during pandemic

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.

Government extends mortgage guarantee scheme

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.

Chancellor announces Spring Budget date

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.

Bank of England raises base rate

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.