The delay to the rollout of Making Tax Digital will cost the Treasury around £280m in lost revenues as its success is predicated on a reduction in the number of errors and intentional mistakes made in tax returns.

The Chancellor's announcement means that sole traders, the self employed and buy-to-let landlords with income of less than the current £83,000 VAT threshold will not have to start quarterly reporting until 2019, a one-year deferral from the planned April 2018 introduction date originally set out in the recent consultation feedback documents issued by HMRC at the end of January.

There is still no confirmation of whether the £10,000 threshold for Making Tax Digital will be raised although this will be confirmed on 20 March when the draft Finance Bill legislation is issued.

Businesses over the £85,000 VAT threshold will have to report under quarterly reporting from April 2018.

The measure will raise £410m once it starts, pulling out a year's worth of revenue the Exchequer had expected. 

Businesses, self-employed people and landlords will be required to start using the new digital service as follows:

• April 2018 - those with income/turnover above VAT threshold (currently £85k for 2017/18) will have to start quarterly reporting if they have profits chargeable to income tax and pay Class 4 national insurance contributions (NICs) 
• April 2019 - those below the VAT threshold will have to start reporting on a quarterly basis - currently reporting via self assessment (if they have profits chargeable to income tax and pay Class 4 NICs (ie, turnovers below VAT threshold)
• April 2019 - all VAT payments will have to be processed through Making Tax Digital for above groups, ie self employed, unincorporated businesses and landlords)
• April 2020 - above taxpayers will quarterly report if they pay corporation tax from 2020.

Note that the details on incorporated businesses and partnerships under quarterly reporting have still not been confirmed.

A consultation on the penalties regime for Making Tax Digital will be issued on 20 March, as well as more details on the administration system for quarterly reporting. 

The government also confirmed at Budget 2017 that following consultation on Making Tax Digital, the legislation published in draft on 31 January 2017 has been revised and expanded to:

• provide explicitly for income-based exemptions to be introduced through regulations;
• allow businesses with profits chargeable to income tax to finalise their total income chargeable to income tax and national insurance contributions (NICs) for any tax year, make a final declaration about this income (outside of any ‘end of period statement’ in relation to business income) and any chargeable gains;
• replicate existing Income Tax compliance powers so that they apply to the Making Tax Digital for business requirements;
• make miscellaneous consequential amendments to the Taxes Management Act 1970; and
• introduce a clause amending Schedule 11 to the Value Added Tax Act 1994, to enable equivalent regulations and exemptions for VAT purposes to those proposed for income tax.

Details about the mechanics of the delay to Making Tax Digital are available here