Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) delayed until 2026

The most significant change to personal taxation in 25 years is now postponed for a second time.

Following growing pressure from the accounting industry for delays, today, HMRC once again postponed Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) until 2026.

HMRC states: “The Government understands businesses and self-employed individuals are currently facing a challenging economic environment, and that the transition to MTD for ITSA represents a significant change for taxpayers, their agents and for HMRC.

“That means it is right to take the time needed to work together to maximise those benefits of MTD for small business by implementing gradually. The Government is therefore announcing more time to prepare, so that all businesses, self-employed individuals, and landlords within scope of MTD for Income Tax, but particularly those with the smallest incomes, can adapt to the new ways of working.”

What exactly is MTD ITSA

Initially, due to start in April 2023, MTD ITSA was the next step in HMRC’s digitisation rollout, impacting 4.2 million out of the 12 million self-assessment population.

The new system was due to replace the self-assessment tax return process, applying to two specific groups of people – unincorporated traders and property owners.

Those impacted would have been required to make their submissions and returns through MTD software, requiring digital records and quarterly updates.

Following HMRC’s announcement today, 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.

Too many false starts

Today’s MTD delay comes as a low blow for the industry.

Countless software vendors – IRIS included – have been building apps to help HMRC execute MTD, while accountants across the country have been franticly preparing and working with clients.

Our Managing Director for Accountancy, Jim Scott, commented: “We cannot continue with these delays. HMRC must find time to complete their work and not prolong MTD with false starts. 

“There must be clarity from the Government for all involved, including where the responsibilities lie in the process. MTD is a huge change in how we submit our taxes, and HMRC is not providing information transparently.”

Don’t let digitisation become a dirty word

A message to accountants: please don’t let the MTD delays demoralise your efforts to digitise.

Whilst this delay takes the pressure off making quarterly updates to HMRC, starting now and getting this embedded with clients will make the transition to MTD so much easier when it does arrive.

Frankly, the benefits of digital also stretch far beyond MTD.

In this precarious economic environment, being agile, having real-time data and using process automation are crucial to unlocking the power of your firm.

Manual, admin-based processes are costing accountants and their clients far too much time – you should evolve the way you work.           

Podcast: we recently delved into how practices can evolve, adapt and embrace change to compete in the evolving landscape – listen here.

Delay or not, our stance remains the same: we provide accountants with the digital tools they need to empower every hour – learn more about unlocking your power here.