Making Tax Digital for income tax self-assessment (MTD ITSA) has been delayed once again, to the relief of many accountants.
While we’ve been working hard to help our clients prepare for the (now delayed) changes, you might be scratching your head wondering what all the fuss is about.
In this blog, we explain what you need to know and what happens next.
MTD ITSA delayed until 2026
MTD ITSA, which we explained in a previous blog, was due to commence from April 2024 after the Covid-19 pandemic had pushed back the original 2023 start date.
On 19 December, Victoria Atkins, the financial secretary to the Treasury, announced a series of adjustments to the scope and timing phases of MTD ITSA:
- a two-year delay until April 2026 for mandatory MTD ITSA filing
- minimum income reporting level increased from £10,000 to £50,000, with those earning more than £30,000 mandated to join the scheme in 2027
- partnerships will not be brought into the scheme in 2025.
Furthermore, the situation for landlords and sole traders earning less than £30,000 will be reviewed to see if MTD ITSA can be changed to meet the needs of smaller businesses.
Why has MTD ITSA been delayed?
According to the Government, it is delaying the commencement date of MTD ITSA because of the current economic context, with high inflation and a recession looming over the UK economy.
In her statement, Atkins wrote:
“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.
“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.”
However, the results of a survey published on 12 December suggested MTD ITSA needed to be delayed because taxpayers were simply not ready.
The survey questioned accountants and tax professionals, and found:
- 97% of respondents did not think MTD ITSA could be successfully introduced from April 2024
- 94% were uncomfortable with the level of taxpayer awareness
- 94% were uncomfortable about taxpayers’ ability to comply.
Alison Hobbs, chair of the joint committee responsible for the survey, said:
“[The Government’s] announcement recognises reality. The incredibly limited testing, combined with significant problems still to be resolved, means that this delay had to happen.”
Do I still have to worry about MTD ITSA?
The new 2026 deadline is when digitalisation of your tax affairs will be legally required, but you should still be making changes now, if you haven’t already.
After all, the whole idea of MTD is to transform businesses by making tax less of an administrative burden – don’t underestimate the scale of that.
Even getting started early will help you budget for a software solution to comply with MTD for ITSA when it does eventually arrive, such as Xero or Sage cloud accounting software.
All the while, you’ll enjoy the benefits of digitalising your taxes, including accurate reporting and predictions of your final tax bill.
These software solutions also have great benefits beyond MTD, including payroll administration tools and receipt scanning – so why not get started now?
Not convinced? Get in touch with the team today.
