Making Tax Digital for Income Tax delay

On Monday, HMRC announced that Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) has been postponed until April 2026.

HMRC has announced a delay to the launch of Making Tax Digital for Income Tax Self Assessment (MTD for ITSA). The scheme is part of the government’s wider ambition to fully digitalise the tax system and reduce the burden of tax returns for small businesses. In a written statement, HMRC said: 

“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.” 

So, this gives smaller businesses with lower income an extra year to prepare for the switch. 

HMRC says that the main reason behind this delay is to relieve pressure on businesses caused by the current economic environment. Though the benefits of digitising tax are already being demonstrated by MTD for VAT, the transition will still feel like a big change. 

The new deadline is when digitalisation will be legally required, but experts advise you should be making changes now, if you haven’t already. 

The number of taxpayers that will be affected by MTD ITSA will be huge, even considering the revised thresholds. Accountants need to take full advantage of this extra time and drive the digitalisation of their practice while supporting customers to do the same. 

Remember, the whole idea of MTD is to transform businesses by making tax less of an admin burden. Using compliant software as soon as possible will bring these benefits earlier and reduce the anxiety which can come about from falling behind on taxes and regulations.  

Software will also bring greater visibility of performance, helping businesses to manage costs and make more confident decisions based on real-time information. 

The basis period reforms remain unchanged. This means they will start in 2023-2024.  

The basis period reforms are an attempt by the government to align business accounting periods to the tax year (6 April to 5 April). 

The majority of businesses already align to the tax year, but some chose different periods for reasons such as managing tax payments more effectively, or minimising the impact of seasonal fluctuations on financial results.