The requirement for self-employed businesses and landlords to report tax matters digitally is to be delayed.
Making Tax Digital for income tax self-assessment (MTD for ITSA) will now be a requirement for some businesses from April 2026, with a later start date for smaller businesses.
Victoria Atkins, the Financial Secretary to the Treasury, made an announcement on 19 December 2022 that included the following:
“The government is therefore announcing more time to prepare, so that all businesses, self-employed individuals, and landlords within scope of MTD for Income Tax, but particularly those with the smallest incomes, can adapt to the new ways of working.
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 over £30,000 will be mandated from April 2027.
The government will now review the needs of smaller businesses, and particularly those under the £30,000 threshold. This will look in detail at whether and how the MTD for ITSA service can be shaped to meet the needs of smaller businesses 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 government will lay out the plans for any further mandation of MTD for ITSA.
Following the phased approach, the government will not extend MTD for ITSA to general partnerships in 2025. It remains committed to introducing MTD for ITSA to partnerships at a later date.
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. This makes penalties fairer and simpler for taxpayers. The government will introduce the new penalty system for Income Tax Self-Assessment taxpayers outside the scope of MTD after its introduction for MTD taxpayers.”
The government hopes, nevertheless, that “most taxpayers within the scope of MTD for ITSA will be able to sign-up voluntarily before they are mandated to do so”.