The start date for making tax digital for income tax is to be delayed until 6 April 2026 at the earliest, with the requirements to be phased in.
The Treasury has announced that the mandation of 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 between £30,000 and £50,000 will be mandated from April 2027.
The government will review the needs of smaller businesses, and particularly those under the £30,000 threshold. Once that review is complete, and in consultation with businesses, taxpayers, agents, and others, the government will lay out plans for any further mandation of MTD for ITSA.
Although the government has said it remains committed to extending MTD for ITSA to general partnerships, this will be introduced at a later date rather than being mandated in 2025.
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.
Various HMRC guidance pages have been updated to reflect the announcement:
Overview of making tax digital;
Sign up your client for making tax digital for income tax;
Sign up as an individual for making tax digital for income tax;
Check if you can sign up for making tax digital for income tax;
Using making tax digital for income tax; and
Check when to sign up for making tax digital for income tax.
The CIOT, ATT and ICAEW all welcomed the delay.
Alison Hobbs, chair of the joint CIOT and ATT Digitalisation and Agent Strategy Committee, commented: ‘This announcement recognises reality. The incredibly limited testing, combined with significant problems still to be resolved, means that this delay had to happen.
‘This further pause in the roll-out of MTD for ITSA must be used effectively to overcome the problems which remain with MTD for ITSA, and we welcome that HMRC have committed to do this in partnership with stakeholders,’ Hobbs added. ‘It is vital that these hurdles are overcome so we are not back in this position again in another couple of years.
Writing in Tax Journal, Paul Aplin OBE suggested the delay should be used not only to resolve some critical issues, such as a widening of the pilot and multi-agent authorisation, but also ‘to pause and look afresh at how the core ambition for MTD can best be delivered’.
‘Perhaps it is time for a wider review, along the lines of that conducted by Lord Carter of Coles in 2006,’ Aplin said. That review ‘turbo-charged’ HMRC’s digitalisation programme. ‘A similarly broad review could do so again. There is scope for some radical thinking.’
Meanwhile, Praveen Gupta, national head of tax at Azets, warned that digitalisation could now fall down the list of priorities for SMEs. ‘By delaying MTD until 2026, digitalisation could now simply fall down the priority list of busy business owners, many of whom are purely focused on fighting the next fire and do not have the resource to plan long-term.
‘We wholeheartedly support the move to digital accounting,’ Gupta said. ‘However, the launch of MTD has been chaotic from the start and there is little evidence to suggest this will improve over the next two years, during which time there will be a general election.
‘Our advice to business owners is to continue with digitalisation plans, despite the potential for further delays. Adopting accounting technology has enormous benefits in that it provides critical real time information, and doing so well in advance of MTD coming into effect will help smooth the process before it becomes mandatory,’ he added.
The start date for making tax digital for income tax is to be delayed until 6 April 2026 at the earliest, with the requirements to be phased in.
The Treasury has announced that the mandation of 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 between £30,000 and £50,000 will be mandated from April 2027.
The government will review the needs of smaller businesses, and particularly those under the £30,000 threshold. Once that review is complete, and in consultation with businesses, taxpayers, agents, and others, the government will lay out plans for any further mandation of MTD for ITSA.
Although the government has said it remains committed to extending MTD for ITSA to general partnerships, this will be introduced at a later date rather than being mandated in 2025.
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.
Various HMRC guidance pages have been updated to reflect the announcement:
Overview of making tax digital;
Sign up your client for making tax digital for income tax;
Sign up as an individual for making tax digital for income tax;
Check if you can sign up for making tax digital for income tax;
Using making tax digital for income tax; and
Check when to sign up for making tax digital for income tax.
The CIOT, ATT and ICAEW all welcomed the delay.
Alison Hobbs, chair of the joint CIOT and ATT Digitalisation and Agent Strategy Committee, commented: ‘This announcement recognises reality. The incredibly limited testing, combined with significant problems still to be resolved, means that this delay had to happen.
‘This further pause in the roll-out of MTD for ITSA must be used effectively to overcome the problems which remain with MTD for ITSA, and we welcome that HMRC have committed to do this in partnership with stakeholders,’ Hobbs added. ‘It is vital that these hurdles are overcome so we are not back in this position again in another couple of years.
Writing in Tax Journal, Paul Aplin OBE suggested the delay should be used not only to resolve some critical issues, such as a widening of the pilot and multi-agent authorisation, but also ‘to pause and look afresh at how the core ambition for MTD can best be delivered’.
‘Perhaps it is time for a wider review, along the lines of that conducted by Lord Carter of Coles in 2006,’ Aplin said. That review ‘turbo-charged’ HMRC’s digitalisation programme. ‘A similarly broad review could do so again. There is scope for some radical thinking.’
Meanwhile, Praveen Gupta, national head of tax at Azets, warned that digitalisation could now fall down the list of priorities for SMEs. ‘By delaying MTD until 2026, digitalisation could now simply fall down the priority list of busy business owners, many of whom are purely focused on fighting the next fire and do not have the resource to plan long-term.
‘We wholeheartedly support the move to digital accounting,’ Gupta said. ‘However, the launch of MTD has been chaotic from the start and there is little evidence to suggest this will improve over the next two years, during which time there will be a general election.
‘Our advice to business owners is to continue with digitalisation plans, despite the potential for further delays. Adopting accounting technology has enormous benefits in that it provides critical real time information, and doing so well in advance of MTD coming into effect will help smooth the process before it becomes mandatory,’ he added.
