The Making Tax Digital initiative means that businesses and landlords with a business income over £10,000 per year will need to keep digital records and update HMRC quarterly using government software.
The delay will give businesses more time to prepare for the changes and will allow HMRC to “deliver a robust service”.
It will also allow more time for pilot testing which is already underway and will be expanded in 2022 and 2023 tax year. Large scale testing is slated for 2023 and 2024 tax year.
General partnerships will not be required to make digital tax changes until April 2025 and an updated penalty system will also come into effect from April 2024.
Lucy Frazer, financial secretary to the Treasury, said: “The digital tax system we are building will be more efficient, make it easier for customers to get tax right, and bring wider benefits in increased productivity.
“But we recognise, as we emerge from the pandemic, it’s critical that everyone has enough time to prepare for the change which is why we’re giving people an extra year to do so.”
She added that the government was “firmly committed” to the scheme and “building a tax system fit for the 21st century”.