MTD for Income Tax Self-Assessment (MTD for ITSA)

The UK Government has confirmed that MTD for ITSA, which was due to be introduced in April 2024, will now be postponed until April 2026.

MTD for ITSA will require certain businesses, self-employed individuals and landlords to keep digital records and use MTD-compatible software to submit updates to HM Revenue and Customs (HMRC).

The UK government “understands businesses and self-employed individuals are currently facing a challenging economic environment and that the transition to MTD for ITSA represents a significant change for taxpayers, their agents and for HMRC. That means it is right to take the time needed to work together to maximise those benefits of MTD for small businesses by implementing this gradually.”

The UK Government is therefore giving everyone more time to prepare.  This is so that all businesses, self-employed individuals, and landlords within scope of MTD for ITSA, but particularly those with the smallest incomes, can adapt to the new ways of working.

• MTD for ITSA will now be introduced from April 2026, with businesses, self-employed individuals, and landlords with income over £50,000 mandated to join first

• Those with income over £30,000 will be mandated from April 2027

• The UK Government will now review the needs of smaller businesses and particularly those under the £30,000 threshold

This will look in detail at whether and “how the MTD for ITSA service can be shaped to meet the needs of smaller businesses 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 government will lay out the plans for any further mandation of MTD for ITSA.”

• Following the phased approach, the UK Government will not extend MTD for ITSA to general partnerships in 2025. It remains committed to introducing MTD for ITSA to partnerships at a later date

The new penalty system, harmonising late submission and late payment penalties for Income Tax Self-Assessment with those for VAT, will come into effect for taxpayers when they become mandated to join MTD.  The UK Government will introduce the new penalty system for Income Tax Self-Assessment taxpayers outside the scope of MTD after its introduction for MTD taxpayers.

https://www.gov.uk/guidance/prepare-for-upcoming-changes-to-vat-penalties-and-vat-interest-charges

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.

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