The Government has announced a two-year delay, as well as further changes, to the rollout of its Making Tax Digital for Income Tax initiative.

Confirmation of changes to the timetable followed weeks of professional bodies, software representatives and practitioners expressing concerns about the timing of the phases, given the challenging economic backdrop.

The delayed implementation of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) means it will now be phased in from April 2026 for a smaller number of taxpayers, rather than the original launch date of April 2024.

The move will give self-employed workers, sole traders and landlords more time to prepare.

What is changing?

From the new start date, instead of MTD for ITSA applying to all self-employed workers and landlords with property and/or business income of more than £10,000, it will now only apply to those with income exceeding £50,000.

As per the original plan, they will have to keep digital records and provide quarterly updates on their income and expenditure to HMRC, using MTD-compatible software.

Those with an income of between £30,000 and £50,000 will also need to comply with this from April 2027. However, all taxpayers will be able to join voluntarily beforehand, should they wish to do so.

What about smaller businesses?

The Government has also announced a review into the needs of smaller businesses, originally due to use the system in 2024, particularly those under the £30,000 income threshold.

The review will consider how MTD for ITSA can be shaped to meet their requirements and the best way for them to fulfil their Income Tax obligations. It is also intended to inform the approach to any further rollout of MTD for ITSA after April 2027.

MTD for ITSA will also no longer be extended to general partnerships in 2025. However, the Government says it “remains committed to introducing MTD for ITSA to partnerships in line with its vision set out in the Tax Administration Strategy”.

Under the original plans, MTD would also be extended to Corporation Tax, but the Government is yet to confirm when this final phase will get underway.

Claire Morgan, Partner at George Hay, comments: “I think agents, software developers and businesses will have breathed a collective sigh of relief when news broke of the delay to MTD for ITSA.

“We had been anticipating that this next phase could be delayed but, until it’s confirmed of course, you have to keep pushing forward as if it were going ahead.

“As with anything like this, the system has to work for those being asked to use it, and it seems HMRC have finally acknowledged that MTD for ITSA needs more attention, that important questions need to be answered, and concerns addressed.

“As advisers, it is our hope that the two-year extension will allow HMRC to provide clarity in respect of the various nuances of the system and give businesses the breathing space they need at an already challenging time.”

How can George Hay help?

Whilst ensuring you are prepared for the implementation of MTD for ITSA may not be so time sensitive, the timetable has simply been altered as opposed to scrapped.

Businesses who are likely to be impacted by the rules would be wise to stay abreast of discussion surrounding the initiative, and to familiarise themselves with what will be expected from them in due course.

We ensure our clients are kept informed of any developments in respect of MTD, and our aim is to make your journey to meeting your digital tax obligations, stress-free and worthwhile beyond compliance, when the time comes.

Our advisers, in Bedfordshire, Cambridgeshire, and Hertfordshire are here to help you navigate the changes and challenges that Making Tax Digital may bring; to talk to one of our friendly professionals, contact us today.

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