The government originally planned to mandate MTD for ITSA starting in April 2024, but has since delayed the mandate to April 2026. More changes could still be on the cards
Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA), which is a government initiative that will mandate the use of digital record-keeping and quarterly reporting for Income Tax Self-Assessment (ITSA) taxpayers, has recently seen some changes following this year’s Autumn Statement.
The good news is that self-employed individuals and landlords will have more time to prepare for MTD for ITSA. The government has made the changes in response to feedback from professional bodies and agents. Other changes include:
- Removing the requirement for End of Period Statements
- Changing the design of MTD for ITSA quarterly updates
- Enabling taxpayers to be represented by more than one tax agent. This would enable quarterly updates to be done by one agent with another agent completing the end-of-year processes and final declaration.
Thresholds and deadlines
Those who are self-employed or landlords with annual income over £50,000 will be mandated to join MTD from April 2026, followed by those with income over £30,000 from April 2027.
The government will keep under review the decision on further mandate of businesses and landlords with income below £30,000.
Keeping this decision under review will allow HMRC to closely monitor users’ experience of MTD through public beta testing and there is sufficient software provision for this section of the market. Businesses and landlords with income below £30,000 will still be able to register voluntarily for MTD, which is what happens already with VAT registration.
Making tax digital exemptions
The government has identified two groups that will be exempt from MTD for ITSA: foster carers and customers without a National Insurance Number.
Foster carers will not be required to operate MTD for ITSA about receipts for qualifying care income. This is because the government has recognised that foster carers derive limited benefits from MTD.
Customers who are unable to obtain a National Insurance Number will also be exempt from MTD for ITSA requirements. This is because the government recognises that these customers face barriers to accessing HMRC’s digital services.
In cases where a customer’s inability to acquire a National Insurance Number is temporary, the government intends for them to be mandated into MTD at a later date. These changes will be set out in regulations.
Regulations will be lset up in February 2024, providing a further step towards introducing MTD for ITSA in April 2026.