Introduction of Making Tax Digital for ITSA delayed until April 2026

Sole traders and landlords now have another two years to get ready for Making Tax Digital for Income Tax Self Assessment (MTD for ITSA), following the government’s decision to delay its introduction until April 2026.

Announced on 19 December 2022, the move has come because the government says it understands that self-employed sole traders and UK landlords are “currently facing a challenging economic environment, and the transition to Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) represents a significant change [for] taxpayers and HMRC for how self-employment and property income is reported.”

Although delayed, recording your income and expenses as you incur or receive them is a great idea, helping you keep on top of your records and ultimately makes filling in your tax return a doddle, you’re not scrambling around trying to find all the bits you’ve filed away as you entered them at the time (tip: upload a copy/photo as the same time).

MTD for ITSA threshold changes

As well as the new later introduction date, the government has also changed the MTD for ITSA income threshold. Previously, MTD for ITSA changes that were planned for introduction for April 2024 would have impacted sole traders and landlords with taxable income of more than £10,000. But:

• From April 2026, only sole traders and UK landlords with taxable income of more than £50,000 will need to keep digital records and provide quarterly updates of their income and costs to HMRC through MTD-compatible software.
• Those with an income of £30,000-£50,000 will need to do the same from April 2027.
• Sole traders and landlords affected by the changes can voluntarily sign up for MTD for ITSA before those dates and use the new digital tax recording and reporting methods.

Government review into MTD for ITSA for smaller businesses

The government has also announced a review into the needs of smaller businesses with taxable income below the £30,000 taxable income threshold. The aim is to find out how MTD for ITSA can be adapted to better meet the needs of smaller businesses so they can meet their Income Tax obligations. The government says this will affect any further roll out of MTD for ITSA after April 2027.

Moreover, the planned MTD for ITSA extension of MTD for ITSA requirements to affect members of ordinary business partnerships in 2025 will not happen, although no new date has as yet been confirmed.

HMRC remains committed to MTD for ITSA

Jim Harra, Chief Executive and First Permanent Secretary, HMRC, said: “HMRC remains committed to the delivery of Making Tax Digital as a critical part of our strategy for digitalising and modernising the tax system, but we want to make sure we get this right and deliver it effectively. A phased approach to mandating MTD for Income Tax will allow us to work together with our partners to make sure that our self-employed and landlord customers can make the most of the opportunities this will bring.

“The [19 December] announcement relates to MTD for ITSA only. Making Tax Digital for VAT has already been implemented and is demonstrating the benefits to businesses and the tax system of digital ways of working,” he argued.

MTD for ITSA key facts

• Under MTD for ITSA, sole trader businesses, self-employed people and landlords are required to keep digital records of their income and costs and send a quarterly summary to HMRC using MTD-compatible software. They can use bridging software that enables them to comply with MTD reporting requirements while using their existing accounting software.
• They’ll then get an estimated tax bill, based on the information they’ve provided. HMRC believes this will enable sole traders and landlords to better budget to pay their Income Tax tax bills when required.
• At the end of the year, sole traders and landlords must digitally submit a statement to HMRC, confirming the figures they’ve submitted, with any accounting adjustments made. They must also make a final declaration, confirming any other income received. They won’t need to file a Self Assessment tax return if they don;t have any other taxable income to report. HMRC will then tell you how much tax you owe, which you must pay by 31 January in the following tax year.

We’re developing our own MTD for ITSA software, which will help you to comply with HMRC rules when introduced from April 2026. Keep up to date by signing up for our MTD for ITSA email. In the meantime, GoSimpleTax is award-winning software that offers you a time-saving way to complete your UK Self Assessment tax return. Although easy to use, it comes with support from our Self Assessment experts. Start your free trial now.

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.