The Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) initiative has been delayed by two years, it has been revealed.
It will now be phased in from April 2026 for a smaller number of businesses, such as landlords and sole traders, rather than the previously announced launch date of April 2024.
How will this impact you?
From the new start date, MTD for ITSA will now only apply if you have an income exceeding £50,000.
You will still need to keep digital records and provide quarterly updates on your income and expenses to HMRC through MTD-compatible software.
If you have an income between £30,000 and £50,000, you will also need to comply with this from April 2027.
However, HMRC has confirmed that all eligible taxpayers, including those with income below £30,000, will still be able to join the scheme early, voluntarily, should they wish to.
Will this impact SMEs?
There will also be a review into the needs of smaller businesses originally due to use the system in 2024, particularly those under the £30,000 income threshold.
The review will consider how MTD for ITSA can be shaped to meet their requirements and the best way for them to fulfil their Income Tax obligations.
It will also inform the approach for any further rollout of MTD for ITSA after April 2027.
MTD for ITSA will also not be extended to general partnerships in 2025, as previously announced. However, the Government says it “remains committed to introducing MTD for ITSA to partnerships in line with its vision set out in the Tax Administration Strategy”.
How can businesses prepare?
When the time comes, a business must use HMRC-compatible software that works with Making Tax Digital for Income Tax, which will allow you to:
- Create and store digital records of each of your business transactions
- Send updates of the totals of your business income and expenses every quarter
- Confirm end-of-period statements.
Looking for advice on MTD for ITSA? Get in touch today.