After months of ever-increasing urgent calls from professional bodies, HMRC’s own advisory board, tax software suppliers, as well as accountants, the Treasury has finally made the decision to delay the next phase of Making Tax Digital (MTD) until April 2026.
There will also be a higher income threshold, potentially exempting many from what was considered to be an additional onerous burden. From April 2026, only self-employed individuals and landlords with an income of more than £50,000 will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD compatible software.
Those with an income of between £30,000 and £50,000 will need to do this from April 2027.
The government is also reviewing the needs of businesses under the £30,000 income threshold. This review will consider how MTD for ITSA (Income Tax Self Assessment) can be shaped to meet the needs of these businesses to fulfil their Income Tax obligations.
Partnerships will not, for now, need to comply with the requirements of MTD.
Financial secretary to the Treasury Victoria Atkins stated:
“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.”