Making Tax Digital for Income Tax (MTD for ITSA) delayed

HMRC, News, Personal Tax, Sole Trader,

It was announced just before the Christmas break that the implementation of MTD for ITSA, for landlords and self employed tax payers will be delayed by two years. It will not come into force until April 2026, and when it does, it will have an increased threshold.

The original version of the new legislation stated that it would apply to any Landlord or self employed person with income exceeding £10,000. The announcement amending the implementation date confirmed the new threshold will be £50,000.

The amended threshold reduces the number of taxpayers that will be affected from four million to 700,000 for the initial stage.

From April 2027, a further 900,000 taxpayers will be affected as the threshold reduces to include those with income from £30,000.

Partnerships were due to be included in MTD for ITSA from April 2025, but this will be reviewed and implemented at a late date.

Why has the change been made?

The Government has announced the change, saying it ‘understood that self-employed individuals and landlords are currently facing a challenging economic environment, and the transition to MTD for income tax self assessment (ITSA) represents a significant change to taxpayers and HMRC for how self-employment and property income is reported’.

This is just the latest delay for the new requirements, which were due to take effect from April 2018. Given the low levels of awareness of the changing rules, we think this is a good thing!

Small Business Needs Review

Before any further roll-out of MTD for ITSA, to the smallest businesses with incomes of less than £30,000, a review will look at ‘the best way’ for them to meet their income tax obligations. These changes will not be made prior to April 2027. There are thought to be approximately 2.6 million taxpayers in this bracket.

Jim Harra, chief executive of HMRC, said: ‘HMRC remains committed to the delivery of Making Tax Digital as a critical part of our strategy for digitalising and modernising the tax system, but we want to make sure we get this right and deliver it effectively. 

‘A phased approach to mandating MTD for income tax will allow us to work together with our partners to make sure that our self-employed and landlord customers can make the most of the opportunities this will bring.’

If you fall within the group of taxpayers with income above £50,000 and would like to discuss how MTD for ITSA will affect you when it arrives, please get in touch.

We’ve helped many of our clients prepare for what we thought was the looming new legislation so we’re happy and able to help! Getting things in place now can also make life easier for you in terms of record-keeping, so there are benefits to getting ahead of the curve if you’d like to do so.

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