Making Tax Digital (MTD) is the government’s plan to digitise tax returns to make them simpler, easier and more efficient for everyone. After completing the rollout of MTD for VAT returns the government has now delayed the rollout of MTD for Income Tax Self Assessment to give businesses more time to prepare.
Initially, all sole traders with income over £10k would need to submit their returns using MTD-compliant software by April 2024. The government recently announced a two-year delay and some major changes to the income thresholds which decide when you need to comply.
What this means for you
From April 2026, self-employed individuals and landlords with an income of more than £50,000 will be required 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 government will not extend MTD for Income Tax Self Assessment (ITSA) to general partnerships in 2025 as previously planned.
There will also be a new penalty system. This will be designed to better align penalties for MTD for Income Tax with MTD for VAT.
What if my income is under £30k?
The government has said that it will review the needs of smaller businesses, particularly those under the £30,000 threshold before making further decisions.
This will look in detail at how the MTD for ITSA service can be shaped to meet small businesses' needs and the best way for them to fulfil their Income Tax obligations.
In an announcement in December, Victoria Atkins, Financial Secretary to the Treasury, said that smaller businesses should be able to experience the benefits of increased digitalisation of Income Tax. That’s why they are launching the review into how to improve MTD for them.