Last week, it emerged that the government’s plans to impose digital tax returns on the self-employed and small businesses were likely to be delayed for a further two years. This afternoon, the First Secretary to the Treasury issued a written statement confirming the changes.

The key adjustments to the scope and timing of MTD ITSA, as highlighted in Victoria Atkin’s ministerial statement today, include:

  • A two-year delay until April 2026 for mandatory MTD ITSA filing.
  • Minimum income reporting level increased to £50,000, with those earning more than £30,000 mandated to join the scheme in 2027.
  • The situation for landlords and sole traders earning less than £30,000 will be reviewed to see if MTD ITSA can be shaped to meet the needs of smaller businesses;
  • Partnerships will not be brought into MTD for ITSA as previously planned in 2025.
  • Points-based penalty system to be extended to MTD ITSA filers when they join.

The intention to launch the multibillion-pound programme, “Making Tax Digital”, was first announced by George Osborne in the spring budget of 2015. It has already been postponed from April 2023 to April 2024, and will now be delayed again for a further two years. The new legislation means that from April 2026, any self-employed person or micro-business earning more than £50,000 a year (a welcome increase for many from the government’s previously planned £10,000 threshold) will have to keep their accounting records digitally and then file quarterly updates to HMRC using new software.

HMRC believes that rolling out MTD to the self-employed and SMEs will help recover the £32bn the taxman believes is underpaid each year – or 5.1 per cent of the country’s annual tax haul. The programme aims to reduce errors by implementing automation and error checks that help improve accuracy. However, there has been widespread concern around the proposed launch. A recent joint survey by the Chartered Institute of Taxation (CIOT) and the Association of Taxation Technicians (ATT) found that 97% did not think that MTD for ITSA, in its current form, could be introduced successfully from April 2024. So, the delay until 2026 will be a relief to many.

Qualifying business owners will need to make sure they’re ready for when MTD finally rolls around. It’s essential that you keep complete and accurate records of your business and other income so you can make accurate tax and VAT returns. If you have any queries surrounding MTD or today’s announcement, please contact your usual mgr advisor directly, or email info@mgr.co.uk.