Making Tax Digital for Income Tax Self Assessment, affecting self-employed individuals and landlords earning over £10,000, was due to be mandatory from April 2024, but has been delayed, the government announced on Monday 19th December.
MTD ITSA will be delayed by two years, becoming mandatory from April 2026. The new timeframes set out a phased mandation, allowing those with lower incomes more time to prepare. The minimum income threshold has been increased to £50,000, and those earning between £30,000 and £50,000 have even more time to prepare, being mandated to join the scheme from 2027.
The government has also said it will review the approach to smaller businesses earning under £30,000 and on completion of that review will lay out plans for that group.
Details of the key changes
- From April 2026, 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 between £30,000 and £50,000 will need to do this from April 2027.
- HMRC anticipates that most taxpayers within the scope of MTD for ITSA will be able to sign-up voluntarily before they are mandated to do so.
- The government remains committed to introducing MTD for ITSA to partnerships at a later date, to be confirmed.
- The government will review the needs of smaller businesses, and particularly those under the £30,000 threshold, before taking further decisions. This review 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. Once that review is complete – and in consultation with businesses, taxpayers, agents, and others – the government will lay out the plans for any further mandation of MTD for ITSA.
What the delay of MTD ITSA means for accounting practices and businesses
You may have been on track for April 2024, or you may have seen that date as overly optimistic. Regardless of view, the new timeframes offer more time to prepare and ensure a smooth and successful rollout.
Accounting practices who already have plans to move clients onto software will want to continue with those plans – meaning your practice and your clients will enjoy the benefits of software to reduce the headaches of business administration – and becoming MTD compliant when the deadline rolls around will be as easy as toggling on the feature in the software.
MTD ITSA: A quick reminder on what you’ll need to do
Individuals under MTD for Income Tax will no longer submit a tax return to HMRC. Instead, they must use MTD-compatible software to keep digital records, submit four quarterly updates of their income and expenses during the tax year, and then finalise their figures at the end of the year.
Clear Books is MTD-compatible
Clear Books is HMRC recognised for MTD for VAT, and we continue to work to offer the easiest to use accounting and tax tools for UK small businesses and accounting firms. The change in timeframes for rolling out MTD for ITSA doesn’t change this vision, and gives us more time to help our customers be prepared for the change.
Clear Books is an award-winning online accounting software for small businesses. Thousands of business owners, contractors, freelancers and sole traders across the UK use our easy-to-use online accounting software to manage their business finances.
We’re here to help
As ever, Clear Books is always here to help. We will continue to monitor the situation and keep you updated. If you need additional support at any time please reach out to our support team
