MANDATORY USE OF MAKING TAX DIGITAL FOR ITSA DELAYED

The Government announced on 19 December 2022 that the transition for to Making Tax Digital for Income Tax Self Assessment (ITSA) has been delayed with mandatory use of MTD compatible software due to be phased in from April 2026, instead of April 2024 as previously written.

From April 2026, self-employed individuals and landlords with an income of over £50,000 will be required to keep digital records as well as providing HMRC, through MTD compatible software, quarterly updates on their income and expenditure. Those with an income between £30,000 and £50,000 will be obligated to do this from April 2027.

People can voluntarily join at any time as the MTD approach is all about helping to prevent common errors and be a time saving solution.

The government is also set to review requirements of smaller businesses which fall under the £30,000 income threshold. It will take in how MTD for ITSA can help smaller business fulfil income tax obligations.

Victoria Atkins, Financial Secretary to the Treasury, said: “It is right to take the time to work together to maximise the benefits of Making Tax Digital for small businesses by implementing the change gradually. It is important to ensure this works for everyone: taxpayers, tax agents, software developers, as well as HMRC.

“Smaller businesses in particular should be able to experience the benefits of increased digitalisation of Income Tax in a way which meets their needs. That is why we are also today announcing a review to establish the best way to achieve this.”

Jim Harra, Chief Executive and First Permanent Secretary, HM Revenue and Customs, commented: “HMRC remains committed to the delivery of Making Tax Digital as a critical part of our strategy for digitalising and modernising the tax system, but we want to make sure we get this right and deliver it effectively.

“A phased approach to mandating MTD for Income Tax will allow us to work together with our partners to make sure that our self-employed and landlord customers can make the most of the opportunities this will bring.”

You can read the full government statement here.

By taking a proactive approach now, you can reap the rewards of being prepared when MTD for ITSA goes live.