HMRC has long planned to bring in rules which make quarterly digital income tax returns mandatory.
However, given the ongoing economic challenges faced by businesses, the deadline has now been extended.
The government recently announced that Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) will now be mandated starting from April 2026, rather than from April 2024.
The change has been made after the Government said it ‘understands that businesses and self-employed individuals are currently facing a challenging economic environment, and that the transition to MTD for ITSA for the self-employed and small landlords represents a significant change for taxpayers, agents and for HMRC’.
The MTD changes have certain criteria attached, including:
- From April 2026, self-employed individuals and landlords with an income of more than £50,000 will be required (mandated) to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software.
- Those with an income of between £30,000 and up to £50,000 will need to do this from April 2027.
- The UK Government will not extend MTD for ITSA to general partnerships in 2025. The government remains committed to introducing MTD for ITSA to partnerships at a later date, to be confirmed.
No decision has yet been made on the MTD rules for smaller businesses. The government will review the needs of smaller businesses, particularly those under the £30,000 threshold before taking further decisions.
Andrew Diver, Beatons’ Head of Taxation, said: “The extension is good news in some ways as it lessens the pressure during a time of uncertainty and squeezed budgets. It is reassuring to hear that HMRC understands that the switch to a digital mandate for tax returns is a big one. We also really welcome an increase in the thresholds for who is required to file from just £10,000 in the original proposals now increased to income over £50,000.
“However, the change will come and with anything tax related it is always best to be prepared, thinking ahead about how the change will affect you and your business and how you can make the transition easy. The self-employed and landlords will need to obtain compatible software to keep the required digital records and send returns. There are quite a few options out there and setting aside some businesses time for research and even early implementation will certainly pay off.”
For advice on the change to MTD, please call us on 01473 659777 or email firstname.lastname@example.org