HMRC has announced Making Tax Digital for Income Tax Self-Assessment (ITSA) will now be phased in from April 2026, for self-employed businesses and landlords with an income of more than £50,000.
Those who earn between £30,000 and £50,000 will be phased in from April 2027. Most individuals will be able to join voluntarily beforehand so they can eliminate common errors and save time managing their tax affairs.
Designed to increase efficiency and cut fraud, the scheme was first announced in 2015 and will require quarterly, rather than annual reporting of self-assessment tax returns through MTD-compatible software. They will then have an estimated tax calculation based on the information provided to help budget for tax. At the end of the year, any non-business information can be added and then finalise tax affairs using MTD-compatible software. This will replace the need for a Self-Assessment tax return.
Before the postponement, MTD for ITSA was mandated from April 2024 for customers with a total gross income over £10,000 from self-employment and property in a tax year, with partnerships mandated from 2025.
The UK Government will update their guidance on Making Tax Digital for Income Tax shortly.
A review will also take place into the needs of smaller businesses, particularly those under the £30,000 income threshold and will consider how MTD for ITSA can be shaped to meet the needs of these smaller businesses and the best way for them to fulfil their Income Tax obligations. It will also inform the approach for any further rollout of MTD for ITSA after April 2027.
