The Government has recently announced that Making Tax Digital for Income Tax Self-Assessment (MTD ITSA), which was due to start from April 2024, has now been delayed to April 2026.
Under MTD for ITSA, businesses, self-employed individuals and landlords will keep digital records, and send a quarterly summary of their business income and expenses to HMRC using MTD-compatible software. In response, they will receive an estimated tax calculation based on the information provided to help them budget for their tax. At the end of the year, they can add any non-business information and finalise their tax affairs using MTD-compatible software. This will replace the need for a Self-Assessment tax return.
What has changed in the latest announcement?
Whilst there are no changes to the plans for basis period reform, which will go ahead as planned in the 2023/24 tax year, it has been announced that MTD ITSA will now be mandatory for businesses from April 2026. However, this will only apply to those businesses, self-employed individuals and landlords who have income above £50,000. Businesses with income over £30,000 will be mandated to comply with MTD ITSA from April 2027.
It was originally planned that MTD ITSA would apply to partnerships from April 2025. This will no longer happen, but the government intends to introduce MTD ITSA for partnerships at a later date.
Smaller businesses with income below £30,000 may find the move to MTD ITSA more challenging, so there will be a review of how MTD ITSA could best meet their needs before any change takes place. This will look in detail at how the MTD for ITSA service can be shaped to meet their needs and the best way for them to fulfil their Income Tax obligations. Once that review is complete – and in consultation with businesses, taxpayers, agents, and others – the UK Government will lay out the plans for any further mandation.
Most taxpayers within the scope of MTD for ITSA will be able to sign up voluntarily before they are mandated to do so.
Victoria Atkins, Financial Secretary to the Treasury, said:
“It is right to take the time to work together to maximise the benefits of Making Tax Digital for small businesses by implementing the change gradually. It is important to ensure this works for everyone: taxpayers, tax agents, software developers, as well as HMRC. Smaller businesses in particular should be able to experience the benefits of increased digitalisation of Income Tax in a way which meets their needs. That is why we are also announcing a review to establish the best way to achieve this.”
How Sapphire can help
The Sapphire team have years of experience dealing with self-assessment, and we are here to help with changing your tax returns to the MTD for ITSA system. The change will be an adjustment to all businesses, large or small but we will be here to assist you every step of the way.
If you require any additional information or help, contact a member of the team today on 01625 539997.
