The government is seeking evidence on Income Tax Self-Assessment (ITSA) registration to understand whether bringing forward the point at which the newly self-employed and landlords are required to identify themselves to HMRC would help achieve these goals.

In the documents, HMRC has also stated that ‘in due course earlier registration could mean the newly self-employed and landlord population could access the benefits of Making Tax Digital (MTD) sooner.’

The themes that HMRC would like respondents to consider what is the most effective methods of raising taxpayer awareness of their registration obligations, the timing of the registration obligation in relation to the start of trading, administrative burdens, and costs to the taxpayer and HMRC, and the nature of the obligation, which is currently to notify income tax liability rather than to ‘register’ for income tax self-assessment.

Areas that HMRC is looking to reform include the current obligation to notify liability, create a new obligation triggered by the start of new self-employment or property income, and to explore ways HRMC could use third-party data and intermediaries to identify people who have recently started in business.

To help respondents, HMRC has included an overview of the challenges that have been highlighted with the current system from previous consultations. Some of the issues highlighted are that many new self-employed taxpayers and landlords struggle to know and understand the initial obligations they have.

Another issue highlighted was that taxpayers are aware of the need to register with HMRC but have reported they are confused by the length of time between the start of their new business and the date by which they need to register.

Lucy Frazer, financial secretary to the Treasury, said: ‘The early days of business for the newly self-employed and landlords are a busy time when tax obligations may not be a priority. The government wants to understand whether bringing forward the point at which the newly self-employed and landlords are required to identify themselves to HMRC will help support taxpayers to develop good tax habits early, ultimately creating a better taxpayer experience.

‘The government is committed to maintaining an open dialogue in its effort to design a tax administration system fit for the 21st century that meets the needs of service users and taxpayers.’

The consultation states that the reform in this area aims to create a ‘more efficient tax system that protects the taxpayer’ which is part of the government’s 10-year tax administration strategy ‘Building a trusted, modern tax administration system’.

HMRC explains in the documents that ‘taxpayers can better understand their tax obligations if they interact with HMRC earlier’ as the tax authority can help the taxpayer understand good record keeping, use HMRC’s Budget Payment Plan to plan, and prepare and start paying towards a first tax bill.

The consultation is open for 12 weeks from 30 November 2021 to 22 February 2022. The responses to this consultation will be subject to further discussion in accordance with the tax policy-making process.