The Treasury has announced that Making Tax Digital for income tax self assessment (MTD for ITSA) will be delayed for two more years until April 2026.
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.
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 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 mandating of MTD for ITSA.
Following the phased approach, the government will not extend MTD for ITSA to general partnerships in 2025. It remains committed to introducing MTD for ITSA to partnerships at a later date.
Victoria Atkins, Financial secretary for the treasury, 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.’
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