Making Tax Digital: Delay

The Treasury has confirmed a two-year delay to the Making Tax Digital for income tax (MTD ITSA) timetable, with the First Secretary to the Treasury issuing a written statement confirming the changes.

The timetable change followed weeks of urgent calls from professional bodies such as the CIOT, HMRC’s own Administrative Burdens Advisory Board, tax software representatives and practitioners.

Bowing to the inevitable, financial secretary to the Treasury Victoria Atkins released a ministerial statement setting out adjustments to the scope and timing phases of MTD ITSA:

• A two-year delay until April 2026 for mandatory MTD ITSA filing.
• Minimum income reporting level increased to £50,000
• 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.

While Atkins said the government remains committed to introducing MTD for ITSA to partnerships, the decision on when they might join the scheme will be taken at a later date, as for those on less than £30,000.  “The government understands businesses and self-employed individuals are currently facing a challenging economic environment, and that the transition to MTD for ITSA represents a significant change for taxpayers, their agents, and for HMRC,” the minister wrote.

To maximise the benefits of MTD for small business, the government opted to allow more time to prepare, “so that all businesses, self-employed individuals, and landlords within scope of MTD for Income Tax, but particularly those with the smallest incomes, can adapt to the new ways of working.”

The hotly anticipated MTD ITSA reset was inadvertently revealed shortly after 9am on Wednesday 14 December in a gov.uk post announcing an extension to the MTD ITSA pilot scheme that was taken down shortly afterwards. Update emails were also sent detailing the extension. The last time the Treasury faced such a unified chorus was last year, when the previous FST Lucy Frazer announced a 12-month delay to the timetable in September 2021.

With thanks to Brian Wright of FBD Consultancy, Accounts & Tax Ltd for this update.