Before we begin, here's the acronym breakdown...
MTD - Making Tax Digital
ITSA - Income Tax Self Assessment
HMRC - His Majesty's Revenue and Custom (aka the government)
LOL - Laugh out loud (because to be honest, you have to, or you might go crazy with all these acronyms)
The scheme is part of the government’s wider ambition to fully digitalise the tax system and reduce the burden of tax returns for small businesses. HMRC says that the main reason behind this delay is to relieve pressure on businesses caused by the current economic environment. Though the benefits of digitising tax are already being demonstrated by MTD for VAT, the transition will still feel like a big change.
In a written statement, HMRC said:
“The mandation of MTD for ITSA will now be introduced from April 2026, with businesses, self-employed individuals, and landlords with income over £50,000 mandated to join first. Those with income over £30,000 will be mandated from April 2027.”
HMRC says that the main reason behind this delay is to relieve pressure on businesses caused by the current economic environment. Though the benefits of digitising tax are already being demonstrated by MTD for VAT, the transition will still feel like a big change.
HMRC believes a more gradual implementation will give taxpayers, accountants, and the government more time to prepare for digital ways of working. This is also the stated reason for the phased approach, recognising the increased difficulty faced by those with lower incomes.
Well the new deadline is when digitalisation will be legally required, but experts advise you should be making changes now, if you haven’t already.
The number of taxpayers that will be affected by MTD ITSA will be huge, even considering the revised thresholds. Accountants need to take full advantage of this extra time and drive the digitalisation of their practice while supporting customers to do the same.
Remember, the whole idea of MTD is to transform businesses by making tax less of an admin burden. Using compliant software as soon as possible will bring these benefits earlier and reduce the anxiety which can come about from falling behind on taxes and regulations.
Xero will also bring greater visibility of your business performance, helping you to manage costs and make more confident decisions based on real-time information.
Whatever type of business you are running, you can get ahead by getting ready for MTD for ITSA before the new deadline.
Those affected by MTD for ITSA now have longer to examine their processes and discover where and how the legislation can improve the way they work.
But it’s important not to let the postponement make you complacent. It’s better to take control over your own digital transformation plans, alongside what will be legally required by HMRC.
At Sage, our plans have not changed. We believe in a compelling vision for a competitive UK digital economy that will support a return to growth.
If businesses and accountants are given the clarity and support to embrace digitisation, they will lead that charge. So, we’re more committed than ever to helping our customers and partners in digitising their businesses and becoming more productive, successful, and resilient.