HMRC push back mandatory MTD for income tax self-assessment

After being urged to pause the roll-out for Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA), HMRC has decided to push it back by two years.

Compulsory digital tax reporting for the self-employed was set to come into play from April 2024, however, there were widespread concerns about just how aware and ready taxpayers were.

A recent Chartered Institute of Taxation (CIOT)/Association of Taxation Technicians (ATT) survey of tax professionals looking at MTD for ITSA revealed:

• 97% of respondents do not think that MTD for ITSA, in its current form, can be successfully introduced from April 2024.
• 94% of respondents are uncomfortable with the level of taxpayer awareness.
• 65% are uncomfortable about the availability of suitable software.
• Only 3% of respondents are comfortable about HMRC’s capacity and resources to support taxpayers and agents.

According to HMRC, it’s understood that self-employed individuals and landlords are currently facing a challenging economic environment as it is, and so the mandatory use of software is therefore being phased in from April 2026, rather than April 2024.

From April 2026, self-employed individuals and landlords with an income of more than £50,000 will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software.

Those with an income of between £30,000 and £50,000 will need to do this from April 2027.

There will also be a review into the needs of SMEs – particularly those under the £30,000 income threshold.

Victoria Atkins, Financial Secretary to the Treasury, said, “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.

“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.”

Jim Harra, Chief Executive and First Permanent Secretary, HM Revenue and Customs, 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.”

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