The government has announced a phased mandate of Making Tax Digital for ITSA and a delay to implementation to April 2026 from the original date of April 2024.
Self-employed individuals and landlords will have more time to prepare for Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA), following a government announcement made on 19 December 2022.
This was due to be one of the most significant changes ever seen for income tax reporting. However, understanding that self-employed individuals and landlords are currently facing a challenging economic environment, and the transition to Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) represents a significant change to taxpayers and HMRC for how self-employment and property income is reported, the government is giving a longer period to prepare for MTD. The mandatory use of software is therefore being phased in from April 2026, rather than April 2024.
From April 2026, self-employed individuals and landlords with an income of more than £50,000 will be required 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 £50,000 will need to do this from April 2027. Most individuals will be able to join voluntarily beforehand meaning they can eliminate common errors and save time managing their tax affairs.
The government has also announced a review into the needs of smaller businesses, and particularly those under the £30,000 income threshold. The review will consider how MTD for ITSA can be shaped to meet the needs of these smaller businesses and the best way for them to fulfil their Income Tax obligations. It will also inform the approach for any further roll out of MTD for ITSA after April 2027.
Mandation of MTD for ITSA will not be extended to general partnerships in 2025 as previously announced but further information is awaited on that.
The announcement relates to MTD for ITSA only. Making Tax Digital for VAT has already been implemented and from now on the only way to file quarterly or monthly VAT returns is through MTD compatible software.
For further analysis, please see the following news post issued by the ICAEW Fifth deferral of MTD ITSA | ICAEW and if you have any questions, please ask your usual contact at bennettbrooks.