HM Revenue & Customs have announced this week a delay to Making Tax Digital (MTD) for Income Tax and Self Assessment (ITSA). This only impacts the forthcoming changes anticipated for income tax, and does not affect the MTD for VAT that is already in place covering all VAT registered businesses and their responsibilities in respect of VAT.
Previously is was expected that all self-employed individuals and landlords with sales and/or rental income of over £10,000 were to be included, unless HMRC agree you are digitally excluded.
The UK Government formally announced that Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) will now be mandated starting from April 2026, rather than from April 2024 which was previously expected. Their reasoning was that businesses and self-employed individuals are currently facing a challenging economic environment and more time was needed to implement MTD as well as maximise the benefits derived from it.
Moreover the announcement included some specifics about who and how individuals would be impacted:
- from April 2026, self-employed individuals and landlords with an income of more than £50,000 will be required (mandated) to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software those with an income of between £30,000 and up to £50,000 will need to do this from April 2027
- most taxpayers within the scope of MTD for ITSA will be able to sign up voluntarily before they are mandated to do so
- the UK Government will not extend MTD for ITSA to general partnerships in 2025. The government remains committed to introducing MTD for ITSA to partnerships at a later date, to be confirmed
- the UK Government will review the needs of smaller businesses, and particularly those under the £30,000 threshold before taking further decisions
This is a significant development that many in the industry were expecting. There is to be a huge reliance on technology and software providers that just are not ready yet so with an impending deadline looming it definitely makes sense to defer the implementation of MTD for ITSA. It will also be a large weight off the mind for the smallest of businesses and landlords who were likely to be drawn into the MTD for ITSA net despite relatively small income or simple affairs.
That said we would always recommend to clients that records are digitised where possible and the power of technology harnessed to make record keeping and compliance obligations easier, so if you were thinking of utilising software to help, please do get in touch with us so we can help that transition to be as smooth as possible.
If you have any queries please do not hesitate to get in touch and we’ll be happy to help.
If you have any questions for our Tax experts, please contact us on 01242 776000 or tax@randall-payne.co.uk.
