With the self-employed and landlords facing a challenging economic environment, the government has again delayed the introduction of the Making Tax Digital (MTD) scheme for income tax self-assessment (ITSA) – this time by two years until April 2026.
Although the introduction of MTD ITSA prompted the basis period reform, no corresponding postponement for this has been announced. The tax year 2023/24 is therefore still the transitional year.
Income reporting threshold
Along with the two-year delay, the minimum income reporting threshold has also been raised.
- Rather than an income threshold of £10,000, MTD ITSA will now initially only be mandated – from April 2026 – for a self-employed individual or landlord who has income of more than £50,000.
- Those with income between £30,000 and £50,000 will join a year later from April 2027.
- The government will review the needs of smaller businesses – particularly those with income under the £30,000 threshold – before making further decisions.
Given the low level of awareness of the MTD reporting requirements, the entry point U-turn will be widely welcomed, especially by landlords for whom MTD will have few benefits. Previously, the introduction of MTD ITSA was going to impact on some four million taxpayers, but only 700,000 will now be involved from April 2026, with a further 900,000 included a year later.
Partnerships and companies
General partnerships (those with only individuals) were previously set to start reporting under MTD ITSA from April 2025.
- With the revised timetable, there is no set mandation date for general partnerships.
- Non-general partnerships (such as those with a corporate partner) and limited liability partnerships were previously excluded from the MTD timeline, and this remains the case.
A self-employed individual who wishes to avoid MTD reporting requirements can easily (at least initially) do so by converting to a partnership with the addition of a spouse, partner or other family member as a partner.
The government announcement makes no mention of MTD for corporation tax, so this is unlikely to be introduced any time soon.
If you need help with your tax planning contact our Sheffield based Accounting & Business Advisory on 0114 266 4432 or info@smh.group
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