Making Tax Digital (MTD), the initiative from HMRC that aims to digitise the tax system was set to be mandatory for Income Tax from April 2024, but recent announcements show that it will be postponed until April 2026.
MTD for Income Tax Self-Assessment (ITSA) had been set to impact sole traders and landlords that had gross income over £10,000 with effect from April 2024, requiring them to comply with the new legislation, regardless of when their accounting period ended.
A statement from the Financial Secretary to the Treasury Victora Atkins on 19th December 2022 said, when confirming the changes that to maximise the benefits of MTD for small businesses, it would give those "particularly with the smallest incomes, more time to adopt to the new ways of working."
The statement includes the following:
- The first businesses, individuals and landlords required to join will be those with income over £50,000 from April 2026
- Those with income over £30,000 will then be required to join from April 2027
- A review of those with income of £30,000 and below will now be performed to review their needs so that they can be assisted with fulfilling their Income Tax obligations; any further mandation of MTD for ITSA will be set out once this is complete
- Extension for MTD for ITSA to partnerships will not take place as previously planned in 2025 (although commitment to this at a later date remains)
- Points-based penalty system to link penalties for late submission and late payment will come into effect when they a required to join MTD.
Government anticipates early sign-up will be possible
The statement is available to read in full.
HMRC believes that the next phase of making tax digital (which impacts sole traders, the self employed and landlords) should help with recovering the £32bn the taxman believes is underpaid each year.