Confirmed: Making Tax Digital for ITSA postponed

The Financial Secretary to the Treasury, Fiona Atkins has issued a ministerial statement confirming the postponement of Making Tax Digital for Income Tax until 2026.

Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) was due to be introduced from April 2024 for businesses and landlords with income over £10,000. Following much speculation, it has now been announced that:

• It is to be delayed until April 2026.
• Businesses, self-employed individuals and landlords with income over £50,000 will be mandated to join first.
• Those with income over £30,000 will join from April 2027.
• The government will review and consult on the position for smaller businesses with income below £30,000, meaning that they should not have to join before April 2027, if at all.
• General partnerships will also not have to join in 2025, though the government is committed to bringing them in at a later date yet to be determined.

The delay means that the new penalty system being introduced to harmonise late submission and payment penalties for ITSA with those for VAT is also postponed and will not come into effect for taxpayers until such time as they become mandated to join MTD for Income Tax.

Comment

This is very good news as it completely separates the introduction of MTD for Income Tax from the proposed change to tax basis periods due to commence transitionally from April 2023. It may also mean that those with income below £30,000 will not have to join MTD at all though this is yet to be decided.

Useful guides on this topic

Making Tax Digital: Index & timeline
When does Making Tax Digital (MTD) apply? What does Making Tax Digital really mean? How will it affect you? Does MTD mean quarterly reporting? Is my business exempted from Making Tax Digital?

Basis Period reform
What is basis period reform? Who is affected? What is the new basis year for tax? What are the transitional rules?

External link

HM Revenue and Customs Update: Statement made on 19 December 2022