The mandatory use of software is therefore being phased in from April 2026, rather than April 2024.
The government said it made the decision due to the challenging economic conditions now facing self-employed individuals and landlords.
From April 2026, self-employed individuals and landlords with an income of more than £50,000 will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software. Those with an income of between £30,000 and £50,000 will need to do this from April 2027. Most customers will be able to join voluntarily beforehand, meaning they can eliminate common errors and save time managing their tax affairs.
The government has also announced a review into the needs of smaller businesses, particularly those under the £30,000 income threshold. The review will consider how MTD for ITSA can be shaped to meet the needs of these smaller businesses and the best way for them to fulfil their income tax obligations. It will also inform the approach for any further rollout of MTD for ITSA after April 2027.
Mandation of MTD for ITSA will not be extended to general partnerships in 2025 as previously announced. The government remains committed to introducing MTD for ITSA to partnerships in line with its vision set out in the government’s tax administration strategy.
Victoria Atkins, Financial Secretary to the Treasury, said it is right to take the time to work together to maximise the benefits of Making Tax Digital for small businesses by implementing the change gradually.
“It is important to ensure this works for everyone: taxpayers, tax agents, software developers, as well as HMRC,” she said.
“Smaller businesses in particular should be able to experience the benefits of increased digitalisation of income tax in a way which meets their needs.”
Jim Harra, chief executive and first permanent secretary of HM Revenue and Customs, said a phased approach to mandating MTD for income tax would allow the HMRC to work together with its partners to make sure that self-employed and landlord customers can make the most of the opportunities this will bring.
The announcement relates to MTD for ITSA only. Making Tax Digital for VAT has already been implemented and is demonstrating the benefits to businesses and the tax system of digital ways of working.
