Almost a decade ago, then-Chancellor George Osbourne unveiled the Government’s Making Tax Digital (MTD) scheme.
Since then, however, MTD for income tax self-assessment (MTD for ITSA) has been delayed time and time again, and now for the fifth time. The latest delay means MTD for ITSA will roll out from April 2026, far from the original start date of April 2018.
So what does the latest deferral mean for you, and what actions should you take to comply with the future regime? Let’s dive in.
MTD timeline and changes
Part of a broader initiative to simply the UK tax system, MTD has already been rolled out for VAT. This scheme requires all VAT-registered businesses to keep VAT records and submit their VAT returns using compatible software.
According to HMRC, the Government postponed the commencement date to ease the pressure on businesses facing an uncertain economic landscape after the COVID-19 pandemic. The Government has also decided to ‘phase in’ MTD for ITSA. That means:
- From April 2026: Sole traders and landlords earning above £50,000 annually must follow MTD for ITSA rules.
- From April 2027: Sole traders and landlords earning above £30,000 annually must comply with MTD for ITSA.
So what about general partnerships and smaller businesses earning less than £30,000?
In the 2023 Autumn Statement, the Government confirmed it would wait to extend MTD for ITSA to these groups. However, it will keep this decision under review, which means these businesses may need to comply with the digital tax regime in the future.
Changes to MTD for income tax self assessment requirements
Chancellor Jeremy Hunt announced a number of other changes to the MTD for ITSA processes in last year’s Autumn Statement last year, including:
- Quarterly updates will move to a cumulative basis so taxpayers can correct any errors during the following update. This removes the need to resubmit previous faulty quarters.
- The End of Period Statement (EOPS) will be removed as a formal requirement.
- Foster carers and self-employed individuals without a National Insurance Number will be exempt from MTD for ITSA.
- Landlords who jointly let property will be able to choose to only report their income (and not expenses) on quarterly updates and keep simpler digital records.
- Taxpayers can appoint more than one agent to represent them under MTD for ITSA.
MTD record-keeping reporting requirements
To put some of these changes into perspective, let’s review the record-keeping and reporting requirements that MTD for income tax self assessment brings.
All taxpayers in the scope of MTD for ITSA must keep records and submit quarterly updates of their income and expenses using MTD-compatible software.
Final declaration
The final declaration will combine all business and personal information needed to determine your final tax liability, including trading and property income, allowance, reliefs, dividends and interests.
While this was initially intended to be filed alongside an EOPS, this document will now be bound with the final declaration.
Getting ready for MTD for income tax self assessment
With MTD for ITSA rolling out from April 2026, there’s still a lot of time to find the best software for you, get used to the system and roll it out across your business. There’s also plenty of time to understand exactly what HMRC will be asking of you in the future when it comes to quarterly updates and record-keeping.
But if you ever get stuck with MTD for ITSA and the requirement for software, remember that there is always support out there for you. James Scott can help you with your MTD needs to ensure you can start the new system with the right foot forward.
Contact us to arrange your discovery call and learn how we can help you prepare for MTD for income tax self assessment.