The First Secretary to the Treasury has announced the decision to delay Making Tax Digital for income tax self-assessment (MTD for ITSA) for two years.
Victoria Atkins released an official statement on 19 December, announcing the mandatory filing deadline is being pushed back to April 2026, as well as several changes to the scope of reporting requirements.
The ministerial statement also set out the following amendments:
- The minimum income reporting threshold increased from £10,000 to £50,000. Anyone with an income over £30,000 will be required to file their returns from 2027.
- Partnerships will not be required to join the scheme until after 2025.
- A point-based penalty system will be introduced when taxpayers join the scheme.
The Government has said it will assess the impact of the scheme on smaller businesses, particularly ones with an income of £30,000 and under. Ongoing reviews will aim to mould MTD for ITSA around the needs of smaller businesses.
Atkins 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. That is why we are also today announcing a review to establish the best way to achieve this."
Tax leaders welcome the delay
Tax groups such as the Chartered Institute of Taxation (CIOT) and the Association of Tax Technicians (ATT) have praised the decision to delay the rollout of MTD for ITSA, saying that the announcement "recognises reality".
Alison Hobbs, chair of the joining CIOT and ATT agent strategy committee, said:
"The incredibly limited testing, combined with significant problems still to be resolved, means that this delay had to happen.
"We welcome that HMRC's ambition is for taxpayers to want to use MTD rather than having to do it. We look forward to working with HMRC to achieve those ambitions.
"Hopefully, this additional time will give taxpayers and their agents the opportunity to fully test and enhance these new processes, so they do indeed achieve MTD's objectives."
Figures showed the need for delay
Earlier this month (December 2022), a survey was conducted by the CIOT and the ATT, asking members whether they believed MTD for ITSA, in its form at the time, was ready.
Out of the 322 answers, 97% of people believed the scheme wouldn't be successfully introduced in 2024.
The other top three concerns raised by taxpayers were:
- lack of awareness surrounding the rollout - 97%
- concern over the ability to comply - 94%
- cost burden on clients - 92%.
Only 3% of the people asked said they believed HMRC had the capacity and resources to support taxpayers and agents through the switchover.
In addition, 65% of tax advisers expressed concern over the availability of suitable software to report property and business income and expenses.
Alison Hobbs said:
"This further pause in the roll-out of MTD for ITSA must be used effectively to overcome the problems which remain with MTD for ITSA, and we welcome that HMRC has committed to do this in partnership with stakeholders.
"It is vital that these hurdles are overcome, so we are not back in this position again in another couple of years."
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