Government officials announced a two-year postponement of Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) on December 19, 2022. The new deadline is April 2026. The government is aware that the current economic climate is difficult and that the move to MTD for ITSA is a big deal for taxpayers, tax preparers, and HMRC. Because of this, the government is allowing more time for MTD preparation.

Individuals having gross income from self-employment and/or rental property (UK and abroad) in excess of £10,000 were expected to be required to maintain digital records and produce quarterly submissions and an end-of-period statement using MTD-compatible software beginning in April 2024.

Adjustments to MTD for ITSA:

• MTD for ITSA will now only be applicable from April 2026 for individuals with self-employment and/or gross rental 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 occur 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 its 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.

The government has also announced a review into the needs of smaller businesses with taxable income below the £30,000 taxable income threshold. The aim is to find out how MTD for ITSA can be adapted to better meet the needs of smaller businesses so they can meet their Income Tax obligations. The government says this will affect any further rollout of MTD for ITSA after April 2027.

Moreover, the planned MTD for ITSA extension of MTD for ITSA requirements to affect members of ordinary business partnerships in 2025 will not happen, although no new date has as yet been confirmed.