2-year delay for digital self-assessment
The Treasury has announced that Making Tax Digital (MTD) for income tax self-assessment (ITSA) will be delayed for two more years until April 2026.
Digital self-assessment was due to take effect from April 2024 and would have required all self-employed individuals and landlords with income over £10,000 to report earnings quarterly through the MTD for ITSA system.
Statement from the Treasury
However, in a Written Statement, Victoria Atkins, Financial Secretary to the Treasury, confirmed that the mandation of MTD for ITSA will now be introduced from April 2026. Businesses, self-employed individuals and landlords with income over £50,000 will be required to join first. From April 2027, those with income over £30,000 will be mandated to join, the Treasury said.
Ms Atkins said:
“Across the globe, digitalisation of tax is increasingly the norm. Modernisation of UK businesses and the tax system remains of crucial importance to the UK. Making Tax Digital (MTD) for VAT is already demonstrating the benefits to businesses that digital ways of working can bring.
MTD for Income Tax Self-Assessment (ITSA) will follow, with businesses, self-employed individuals, and landlords keeping digital records and using MTD-compatible software to submit updates to HM Revenue and Customs.”
Ongoing economic challenges
She went on to say:
“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.”
More time to prepare
Then she explains:
“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 mandation of MTD for ITSA will now be introduced from April 2026, with businesses, self-employed individuals, and landlords with income over £50,000 mandated to join first.”
Those with income over £30,000 will be mandated from April 2027
The government will now review the needs of smaller businesses, and particularly those under the £30,000 threshold. This will look in detail at whether and how the MTD for ITSA service can be shaped to meet the needs of smaller businesses and the best way for them to fulfil their Income Tax obligations. Once that review is complete – and in consultation with businesses, taxpayers, agents, and others – the government will lay out the plans for any further mandation of MTD for ITSA.
No extension for general partnerships
Following the phased approach, the government will not extend MTD for ITSA to general partnerships in 2025. They say they remain committed to introducing MTD for ITSA to partnerships at a later date.
The government say they anticipate that most taxpayers within the scope of MTD for ITSA will be able to sign-up voluntarily before they are mandated to do so. HMRC will keep this under review to ensure all taxpayers using the MTD for ITSA service receive a high-quality service.
For more information about how this might affect you, contact a member of our Private Client Team on 01903 234094.