On 19 December 2022 HMRC announced that the introduction of Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) is being delayed. The mandatory use of software for taxpayers on income tax self-assessment (self-employed individuals and landlords) will be phased in from April 2026 instead of April 2024.
MTD requires the submission of quarterly data on income and expenses using accounting software that can connect to HMRC’s systems. MTD for VAT is already in operation and requires VAT-registered businesses to submit their VAT returns via software and keep the relevant records digitally.
Under MTD for Income Tax Self Assessment, self-employed individuals and landlords will be required to keep digital records and provide quarterly details of their income and expenditure through MTD-compatible software if their annual income is more than GBP 50,000. For the self employed and landlords with annual income between GBP 30,000 and GBP 50,000 this will be required from April 2027. Taxpayers will have the chance to operate MTD voluntarily at an earlier date.
A review of the needs of smaller businesses, in particular those with annual income under the GBP 30,000 income threshold, has also been announced by the UK government. This will look at how MTD can meet the needs of smaller businesses and help them to fulfil their income tax obligations.
MTD for Income Tax Self Assessment will not be extended to general partnerships in 2025 as previously intended, but the government still intends to introduce it for general partnerships at a future date.
