The MTD Delay

Making Tax Digital (MTD) for Income Tax has now been delayed, as was widely expected, meaning that it will now not come into force until April 2026.

Victoria Atkins, the Financial Secretary to the Treasury, announced in December that the scheme will be pushed back by two years and will not now come into force from April 2024 as was previously expected.

What was supposed to happen?

MTD for Income Tax was initially going to require all sole traders and landlords with earnings over £10,000 per year to keep digital records and submit quarterly returns online to HM Revenue and Customs (HMRC) detailing their income and expenses for the period. Instead of a self-assessment tax return, they would then be required to submit two final statements making any adjustments and claiming any tax reliefs. The start date was set to be 2024, with partnerships being required to join from 2025.

What has changed?

The changes mean that the scheme will only apply from April 2026, and will initially only apply to sole traders and landlords with earnings from business or property of over £50,000. Those with a turnover of between £30,000 and £50,000 will be required to join the scheme from 2027.

For sole traders and landlords with earnings under £30,000, the government has said it will “review their needs” before deciding on further plans. Partnerships will not be required to join from 2025, but a further date for them to join has not yet been released. A date for applying MTD to Corporation Tax has not yet been announced either.

A new penalty scheme, similar to the one that has been introduced for VAT, will also be brought in when taxpayers are required to join MTD for Income Tax.

What does this mean for me?

The extra two years has given taxpayers some more time to get themselves ready for the changes. This doesn’t mean that you should put off getting ready for MTD, and keeping digital records – for example using Xero – allows you to get a real-time picture of your financial position. Make the change sooner rather than later, to allow you time to get ready for MTD.

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