Making Tax Digital (MTD) has been on the cards for years now, with businesses already pushed towards dealing with their VAT this way. But plans to extend this for Income Tax Self-Assessment (ITSA) have been put on hold once again until April 6, 2026, eight years later than the original planned launch in 2018.
However, even when 2026 comes, the MTD for ITSA will be phased in rather than applying to everyone at once.
The first people doing self-assessment who will need to go digital are landlords and the self-employed who are earning more than £50,000 a year. HMRC estimates that this will mean around 700,000 people are brought into the MTD regime at this point.
The next phase will kick in from April 2027, when landlords and self-employed people earning more than £30,000 a year will be expected to go digital – bringing another 900,000 people into the MTD regime according to HMRC.
Victoria Atkins, financial secretary to the Treasury, announced the delay in the House of Commons just before Christmas.
She said: “The government understands businesses and self-employed individuals are currently facing a challenging economic environment, and that the transition to MTD for ITSA represents a significant change for taxpayers, their agents, and for HMRC.
“That means it is right to take the time needed to work together to maximise those benefits of MTD for small business by implementing gradually.
“The government is therefore announcing more time to prepare, so that all businesses, self-employed individuals, and landlords within scope of MTD for Income Tax, but particularly those with the smallest incomes, can adapt to the new ways of working.”
The needs of smaller businesses are going to be put under review to see how they can be helped to “fulfil their income tax obligations” Ms Atkins said in her statement. Once this review is complete and the various stakeholders – businesses, taxpayers, and their agents among others – have been consulted, the Government will outline further plans for MTD for ITSA, said Ms Atkins.
General partnerships will not be expected to go digital in 2025 now as previously expected, but they will see these changes brought in at a later date. But anyone who wants to sign up for MTD voluntarily before they are required to, has that option.
There may be some benefits to using MTD earlier than you need to, but there could also be drawbacks for some people and businesses. If you want to find out more about the right decision for you, then please contact us and we will give you all the help, support, and information you need.