Making Tax Digital for Income Tax (MTD ITSA) delayed by two years

After many weeks of urgent discussions with various professional bodies, software representatives and tax practitioners, HMRC have now confirmed that MTD for Income Tax will be delayed by a further two years, until April 2026.

What is MTD ITSA?

MTD ITSA is the latest stage of the government’s plan to digitalise the tax system, after MTD for VAT was implemented in April 2022. This stage would affect individuals with self-employment income and property income.

MTD requires individuals to digitalise their books and records, then report to HMRC on a quarterly basis with a final end-of-year submission.

It was initially planned to be introduced from April 2024 for those with an income (turnover) of more than £10,000, which would affect a huge number of taxpayers.

Why are there changes?

It has been well documented that both HMRC and taxpayers seem unprepared for MTD, which was initially due to be fully implemented in less than 18 months. In a recent review, the Office of Tax Simplification (OTS) found that 52% of respondents were unaware of MTD.

With the impact of COVID-19 still being felt and the current economic climate affecting businesses, other matters have taken priority over MTD. It was therefore decided that all parties involved required extra time for preparation, particularly so that those with the smallest incomes can adapt to the new ways of working.

Whilst we welcome this delay from HMRC, it's important to highlight that it's not the first delay, and there remain many key issues needing resolution. 

What are the changes?

Whilst the two-year delay was the key announcement, for some the delay will be even longer. The new implementation route map for the April 2026 launch is as follows:

• The minimum income reporting level has been increased to £50,000, from the initial threshold of £10,000
• Those with income over £30,000 will be required to join MTD a year later, in April 2027
• Those with income less than £30,000 will not be required to join MTD and a review will take place to see how MTD can be shaped to meet the needs of smaller businesses
• Currently there is no anticipated dates for general partnerships or LLPs to join MTD, although the Government remain committed to bringing partnerships within MTD

What do you need to do?

If you are a sole trader or landlord and you were concerned about the impact of MTD, you can, for now, breathe a sigh of relief as there is now time to organise your records in preparation for the transition to MTD.

If you don’t already keep digital records there can be operational benefits from doing so even before MTD comes in, and we would be happy to explore with you what your “journey to digital” might look like.  

How can we help?

We will continue share our insights as MTD updates are announced and ensure you are aware of the changes being introduced.

In the meantime, if you have any concerns or would like to discuss the potential digitalisation of your records, then please get in touch with our Tax Director Matthew Spencer (matthewspencer@lubbockfine.co.uk) or your usual Lubbock Fine contact.