MTD for Income Tax – the 2026 delay announcement
The government has announced a significant delay to the implementation of Making Tax Digital for Income Tax, pushing it back to 2026.
In a major update, the government has announced that Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) will now be delayed until April 2026. This is a two-year pushback from the previous 2024 start date.
The income threshold for joining the scheme has also been increased to £50,000 for the first year, with those earning over £30,000 joining in 2027. This delay is intended to give businesses and software providers more time to prepare for the change.
Why the delay?
The government acknowledged that businesses, particularly smaller sole traders and landlords, are currently facing significant economic pressures, including high inflation and rising energy costs. Mandating a major shift in how they keep records and report to HMRC was deemed an unreasonable burden at this time. The delay also provides HMRC with more time to test its systems and ensure they are robust enough to handle the volume of data MTD will generate.
Changes to the thresholds
The original plan was to mandate MTD for anyone with business or property income over £10,000. This low threshold was heavily criticised. The new phased approach is much more pragmatic. Mandating those with income over £50,000 first targets businesses that are more likely to already be using software or have the resources to adapt. The government will review the needs of smaller businesses before deciding how and when to mandate them.
Don't stop preparing
While the delay offers breathing space, it should not be seen as a reason to abandon plans to digitise your records. Transitioning to cloud accounting software takes time and effort, but it provides immediate benefits in terms of better financial visibility, easier invoicing, and streamlined administration. Businesses that use this extra time to prepare will find the eventual transition to MTD much smoother.
Disclaimer
The information contained in this article is for general guidance on matters of interest only. It should not be used as a substitute for consultation with professional accounting, tax, legal, or other competent advisers. Before making any decision or taking any action, you should consult a Kingscott Dix professional.