HM Revenue and Customs (HMRC) has confirmed the rollout of Making Tax Digital (MTD) has been delayed for two years. As a result, those who are self-employed and landlords will have more time to prepare for changes affecting the Income Tax Self Assessment (ITSA). Through MTD, the form for income tax will have to be completed through the mandatory usage of software but this will now happen at a later date.
According to the Government, the “challenging economic environment” was primarily to blame for this delay.
On top of this, HMRC recognised that the move to MTD for ITSA will be a big change for the majority of affected taxpayers.
Notably, it will have an impact on how self-employment and property income is reported to the tax body.
The move to digital software has been postponed and will be introduced from April 2026, instead of April 2024.
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As of April 2026, anyone who is self-employed, as well as landlords, with an income of more than £50,000 will need to keep digital records and provide quarterly updates on their income and expenditure to HMRC.
This will be completed by taxpayers using the MTD-compatible software in which the self-assessment will be accessed through.
Anyone who has an income of between £30,000 and £50,000 will need to use this software from April 2027.
The majority of affected taxpayers will be able to join voluntarily before the rollout begins, which means they can eliminate common errors and save time managing their tax affairs.
As well as this, the Government has confirmed a review will take place into greater support for smaller businesses, specifically for those under the £30,000 income threshold.
This assessment will take in how the upcoming tax changes involving MTD for ITSA can be used to meet the needs of these smaller businesses.
Victoria Atkins, the Financial Secretary to the Treasury, explained “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.
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“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 today announcing a review to establish the best way to achieve this.”
Paul Falvey, a tax partner at accountancy and business advisory firm BDO, outlined why this delay to the tax changes will come as a “relief” to millions of taxpayers.
Mr Falvey explained “There was a certain inevitability about the further delay to the introduction of Making Tax Digital for Income Tax Self Assessment.
“The lack of available software and pilot testing meant it wasn’t viable for this project to launch as planned in 2024.
“This will come as a relief to the estimated 4.2 million taxpayers with business or property income over £10,000, including landlords, sole traders and partnerships.
“They had been due to file five returns from 2024 and be obliged to purchase new tax software.
“Instead, there will be a phased introduction from 2026 for those self-employed individuals and landlords with an income of more than £50,000, followed by a 2027 start for those with an income above £30,000. This seems like a more realistic approach.
“However, there seems to have been quite a significant rethink about which taxpayers will be in scope for this project as the government has announced a review for those taxpayers falling under the £30,000 income threshold. This might be a recognition that the filing obligations may be too onerous for those on lower incomes.”