Starting from April 2026, the use of software for Making Tax Digital for Income Tax Self-Assessment will be mandatory. The initial phase-in date of April 2024 has been pushed back to April 2026 due to the current economic environment and the significant change that the transition to Making Tax Digital represents. Additionally, the previously announced threshold of £10,000 for self-employment and property income has been raised.
Under the new system, businesses, self-employed individuals, and landlords will need to maintain digital records and submit a quarterly summary of their business income and expenses to HMRC using MTD-compatible software. Based on this information, they will receive an estimated tax calculation to help them budget for their tax. At the end of the year, they can finalise their tax affairs by adding any non-business information, and this will replace the need for a Self-Assessment tax return.
From April 2026, self-employed individuals and landlords earning more than £50,000 per year will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software. Those earning between £30,000 and £50,000 will be required to do the same from April 2027. However, most customers will have the option to join voluntarily beforehand to eliminate common errors and save time managing their tax affairs.
The government has also announced a review into the needs of smaller businesses with an income below the £30,000 threshold. The review will consider how MTD for ITSA can be shaped to meet the needs of these businesses and inform the approach for any further rollout of MTD for ITSA after April 2027.
It’s worth noting that the mandating of MTD for ITSA will not be extended to general partnerships in 2025, as previously announced.
If you need any advice on moving forward with your MTD get in touch with the team at CBReid.