The government has announced that Making Tax Digital for Income Tax will be delayed by two years for landlords and self-employed individuals, giving people longer to prepare for the change to digital taxation.
Making Tax Digital (MTD) is the digitisation of the tax system and it’s been on HMRC's roadmap for some time.
Essentially, if you’re a landlord who completes a self assessment for your rental income, you’ll need to use digital accountancy software to keep track of your income and expenses, and to make quarterly submissions from once MTD for Income Tax is implemented.
Previously, MTD for ITSA was scheduled to come into effect from April 2024 and would have impacted landlords earning more than £10,000 in rental income.
On 19th December, the government announced the following changes to Making Tax Digital for Income Tax:
MTD for Income Tax has now been postponed by two years and the mandatory use of software is therefore being phased in from April 2026, rather than April 2024.
From April 2026, self-employed individuals and landlords with an income of more than £50,000 will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software, such as Provestor’s property accounting software.
Those with an income of between £30,000 and £50,000 will need to do this from April 2027. Most SATR tax payers will be able to join voluntarily before the deadline.
HMRC has also said that MTD will be extended to general partnerships and LLPs at a later date.
James Poyser, Provestor CEO said: “This will be welcome news to a lot of smaller landlords and self-employed people who have yet to think about MTD. However, MTD has not been cancelled, it is still going to happen, so thinking about your business process and accounting now, and getting ahead is still worthwhile.
“The two-year delay and change to thresholds gives everyone affected a chance to get ready without it being a shock to the system given the current climate.”
A statement from HM Treasury said: “Understanding that self-employed individuals and landlords are currently facing a challenging economic environment, and the transition to Making Tax Digital for Income Tax Self Assessment (ITSA) represents a significant change to taxpayers and HMRC for how self-employment and property income is reported, the government is giving a longer period to prepare for MTD.”
Victoria Atkins, Financial Secretary to the Treasury, said: “It is right to take the time to work together to maximise the benefits of Making Tax Digital for small businesses by implementing the change gradually. It is important to ensure this works for everyone: taxpayers, tax agents, software developers, as well as HMRC.”
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