It has been officially reported that Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) has been postponed until April 2026.
MTD for ITSA was set to become mandatory from April 2024 where sole traders or landlords with a gross income of £10,000 or more were required to comply with the new rules regardless of when their accounting period ended.
The Financial Secretary to the Treasury, Victoria Atkins, made a statement on 19 December 2022 to include the following main points:
- Sole traders or landlords with a yearly gross income of £50,000 or more will be required to comply with MTD for ITSA from April 2026 where they will have to keep digital records and provide quarterly updates to HMRC through MTD compatible software.
- Sole traders or landlords with a yearly gross income of between £30,000 and £50,000 will be required to join from April 2027 where they will have to keep digital records and provide quarterly updates to HMRC through MTD compatible software.
The government has also announced a review into the needs of smaller businesses who have a yearly income of less than £30,000 to include how MTD for ITSA can be adapted to meet their needs.
Originally it was planned that partnerships would have to comply with MTD for ITSA from April 2025, however this is not now the case as the government intends to introduce MTD for ITSA for partnerships at a later date.
What Shall I Do Now?
We recommend that sole traders or landlords continue with their plans to digitalise their financial systems well ahead of the April 2026 deadline.
By transforming to digital processes, sole traders or landlords will benefit from important real time information and a smooth transition before MTD for ITSA becomes mandatory.
The deferral of MTD for ITSA gives sole traders or landlords more time to prepare for the significant changes as well as making sure the new system fulfils the needs of income tax obligations for small businesses.