Making Tax Digital for Income Tax delayed to 2026

On 19 December 2022, the government announced that Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) has been further delayed by two years and will now take effect from April 2026. The government recognises the challenging current economic environment, and that the transition to MTD for ITSA represents a significant change for taxpayers, their agents and HMRC. As such, the government is giving a longer period to prepare for MTD.

The original implementation date for MTD for ITSA was for April 2024, and it would have required individuals who have self-employment and/or rental gross income (UK & foreign) in excess of £10,000 to keep digital records and to file quarterly submissions, along with an end of period statement, through MTD-compatible software.

Adjustments to the timeline/eligibility of MTD for ITSA:

• MTD for ITSA will now only be applicable from April 2026 for individuals with self-employment and/or rental gross income (UK & foreign) in excess of £50,000.
• Individuals with eligible gross income between £30,000 and £50,000 will fall into MTD for ITSA from April 2027.
• A review will take place as to whether individuals with gross income below £30,000 will fall into MTD for ITSA. Once this review has taken place, the government will lay out their plans further.
• Partnerships will no longer be brought into the scheme from April 2025 as previously planned, but HMRC remains committed to introducing them at a later date.
• The introduction of the new points based penalty system (read more in our Private Client Briefing here) will impact individuals once they are required to join MTD for ITSA.

‘Basis periods’

There was no comment from the government as to whether the delay in introducing MTD for ITSA would also see a delay in the abolishment of the tax ‘basis periods’, which was set to be introduced in parallel with MTD for ITSA. However, we understand that HMRC intends for basis period changes to proceed from April 2024, with 2023/24 as a transition period.

The abolishment of tax ‘basis periods’ impacts how self-employed individuals and partnerships (including LLPs) are taxed on their profits. Please see our article on these changes here.

For more details about MTD or any of the above, please contact Alfie O’Dell or your usual haysmacintyre contact.