There will have been a sense of relief for many at the announcement yesterday that the start date for Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) has been moved from April 2024 to April 2026.
One of the reasons behind the delay was cited as concern for businesses and self-employed who are ‘currently facing a challenging economic environment’ but tellingly, Jim Harra, Chief Executive of HMRC also said ‘…it is right to take the time needed to work together to implement MTD well, maximise the benefits derived from it, and test and learn as we go.’ It seems that the government simply isn’t ready to launch an initiative of this scale.
In summary:
- 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 up to £50,000 will need to do this from April 2027
- most taxpayers within the scope of MTD for ITSA will be able to sign up voluntarily before they are required to do so
- the UK Government will not extend MTD for ITSA to general partnerships in 2025 though there is still a commitment to do this
The announcement said that the government will be reviewing the needs of smaller businesses, and particularly those under the £30,000 threshold before taking further decisions on this topic. This will, ‘look in detail at how the MTD for ITSA service can be shaped to meet their needs and the best way for them to fulfil their Income Tax obligations.’
Our thoughts
Getting ready for MTD for ITSA was always going to be a major undertaking for small businesses, landlords and those who are self-employed. While it is disappointing that many will have already started preparations, the government is quite right to delay the introduction to ensure that a robust system, that’s right for everyone, is put in place.
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