Making Tax Digital for Income Tax Self-Assessment now delayed until 2026
JANUARY 2023
The most significant change to personal taxation in 25 years has been postponed for a second time. HMRC recently confirmed that once again Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) is postponed, until 2026.
HMRC states: “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.”
What is MTD ITSA?
Initially due to start in April 2023 (then later deferred to April 2024), this was the next step in HMRC’s digitisation rollout, impacting a third of the 12 million self-assessment population.
The new system was due to replace the self-assessment tax return process, applying to two specific groups of people – unincorporated traders and property owners.
Those impacted would have been required to make their submissions and returns through MTD software, requiring digital records and quarterly updates.
Following HMRC’s announcement, this mandate (MTD ITSA) will now be introduced from April 2026, with businesses, self-employed individuals, and landlords with income over £50,000 mandated to join first, and those with income over £30,000 to join by April 2027.
The opportunity for change
This further two-year deferral provides the time to for HMRC review and/or redesign some aspects of MTD identified as problems during the pilot – albeit very small numbers of taxpayers in a restricted pilot.
Clients can use the time to digitalise accounts, which will provide significant efficiency and productivity benefits, and – particularly those with a single source of property income – should build their awareness of MTD ITSA requirements.
There is also the opportunity find the right software for you (including planning for any associated costs), which we are of course happy to help with.
In short, it’s time to focus on keeping good quality digital accounting records. Call us with your questions, on 01642 606003.