Making Tax Digital for Income Tax
There has been a major change in the way MTD-ITSA will be introduced and also to the start date. Below is the text of a letter received from HMRC. In summary, the plan has been put back a minimum of two years and turnover banding has been introduced.
I’m writing to let you know that yesterday the UK Government 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 UK Government understands 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, you as agents, and for HMRC.
That means it is right to take the time needed to work together to implement MTD well, maximise the benefits derived from it, and test and learn as we go.
We will continue to work with you to prepare for the transition to MTD for ITSA, including the testing of the service to ensure that it works for taxpayers and you as agents. You can continue supporting your clients now, by helping them keep digital records and preparing them to sign up ahead of mandation.
I know that speculation last week may have caused you concern and frustration, and providing certainty at the earliest opportunity has been a priority for us. I hope that this update gives you further clarity.
The details announced yesterday, which may be of particular interest to you, include:
• 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
• we anticipate 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 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
• the UK Government will review the needs of smaller businesses, and particularly those under the £30,000 threshold before taking further decisions. This 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 UK Government will lay out the plans for any further mandation of MTD for ITSA
Thank you for your continued support in preparing your clients for MTD for ITSA.
Chief Executive and First Permanent Secretary – HMRC