Making Tax Digital for Income Tax - Delayed.
The UK government's Making Tax Digital (MTD) initiative, which aims to modernize the tax system by requiring businesses and individuals to submit their tax returns online, has been delayed again till April 2026.
The delay is due to issues with the government's IT systems and lack of awareness among taxpayers. Providing more time for HMRC, Tax Agents (accountants) and Taxpayers to familiarise and get ready for the change.
What would be different under MTD?
Under the MTD program, self-employed individuals and landlords will be required to report their self-assessment tax returns (a form that tells the government how much tax someone owes) on a quarterly basis instead of annually.
This would have affected self-employed and landlords who earned over £10,000 in the tax year. Moving from filing once a year, to four times a year with an annual statement at the end is a big change in the tax system.
The aim was for the UK to lead the way in digitising the tax system.
Why has this changed??
There were many concerns around whether taxpayers, tax advisors and HMRC were ready for the digital change.The issues around the complexity of the program and the potential burden on taxpayers and small businesses had not been resolved. Along with this, the UK Government has other priorities at the moment as we collectively try to find stability during a cost of living crisis.
What are the new rules and how does it affect me??
HMRC has increased the annual income threshold for MTD from its initial proposal of £10,000 to £50,000. The threshold will be reduced to £30,000 in April 2027.
- If you are self-employed (sole trader) or a landlord earning under £30,000 - you will no longer be affected by Making Tax Digital for Income Tax (yet).
- If you earn between £30,000 and £50,000 - you will be mandated to use MTD approved software for quarterly filings from April 2027.
- If you earn over £50,000 - you will be mandated to use MTD approved software from April 2026.
This means the total number of individuals affected by MTD ITSA (Making Tax Digital for Income Tax Self Assessment) has reduced from around 4.5 million taxpayers to 850,000 in April 2026 and rising to 1.6 million in April 2027.
Despite the delays, the government remains committed to the implementation of MTD. Full details of the HMRC press release can be found here.
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