MTD for Income Tax Self-Assessment

Making Tax Digital (MTD) was due to be introduced for Income Tax Self-Assessment (ITSA) from 6 April 2024 for self-employed businesses and landlords with an annual income above £10,000. Its launch date was originally April 2023, but was delayed for a year (see written ministerial statement on 23 September 2021 here).

In a further written ministerial statement made on 19 December 2022, it was announced that MTD for ITSA would not only be delayed further, but that the £10,000 income threshold would also be increased. Those businesses/landlords with incomes greater than £50,000 will be mandated from April 2026, with those above £30,000 from April 2027. General partnerships were due to be subject to MTD for ITSA in 2025, but this has now been postponed sine die. See the full statement here.

The outcome of HMRC’s Small Business Review was also released as part of the Autumn Statement, delivered on 22 November 2023. This review confirmed that businesses and landlords with incomes below £30,000 will not be subject to MTD for ITSA after 2027, though the position will be kept under review. Further simplification measures were also unveiled, including that:

quarterly reporting will be on a cumulative basis, so taxpayers will not need to resubmit a report in the event of an amendment or error;
the requirement to complete End of Period Statements for each source of income will be removed;
landlords of jointly-owned property can opt not to submit expenses within quarterly reports, and keep less detailed digital records;
Foster carers and those without national insurance numbers will be exempt from the process;
Three-line accounts will still be supported; and
Efforts will be made to ensure multiple agents can engage in the process

(see here for HMRC’s Small Business Review outcome report)

The primary legislation setting out the foundation for digital reporting and record keeping for income tax, amending TMA 1970, can be found here.

The regulations which set out how MTD for ITSA will work are here.

On 22 February 2024, the amended regulations for MTD ITSA were laid down within the Income Tax (Digital Requirements) (Amendment) Regulations 2024. The main change was that the deadline for quarterly reporting will be moved to the 7th of the month, thus bringing it in line with VAT reporting obligations. See the amended regulations here.

Links to HMRC’s MTD for ITSA guidance on GOV.UK are provided below.

HMRC’s MTD for Business stakeholder communications pack is here.
HMRC’s policy paper about customer costs and benefits for the next phases of MTD is here.
HMRC’s tax information and impact note is here.
To check if you are eligible for MTD for ITSA – see HMRC’s guidance here.
To check when you must sign up to MTD for ITSA – see HMRC’s guidance here.
To find out about keeping digital records, signing up and using software to send income and expenses updates – see HMRC’s guidance here.
To apply for an exemption from MTD for ITSA – see HMRC’s guidance here.
For information about out how to use MTD for ITSA instead of a Self Assessment tax return and how to sign up if you’re eligible – see here.
Making Tax Digital for Income Tax as an agent: step by step. If you're an agent, find out how to use Making Tax Digital for Income Tax instead of a Self Assessment tax return for your clients see here.

Some businesses and agents are already using software to keep their business records digitally and provide updates to HMRC on a voluntary basis as part of a live pilot to test and develop the MTD for ITSA service. To check which software packages are compatible with MTD for ITSA and find out what they do – see here. Further information on how the rules work, how to keep digital records, where to find appropriate software for sending updates to HMRC and how to sign up to the pilot is available here.

Draft Notices

On 1 July 2022, HMRC published draft tertiary legislation for Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) for consultation. These draft notices are made under powers conferred by the MTD for ITSA regulations and provide additional information regarding:

the use of functional compatible software;
the information required when submitting a quarterly update or end of period statement; and
retail sales elections.

The consultation ran until 28 July 2022 and CIOT put in a formal response (see here for the submission). The draft notices specify the proposed dataset requirement. HMRC have said that they will publish guidance later in in the year to explain more about how MTD for ITSA will work in practice, including how accounting and tax adjustments should be made.

Private Beta pilot

HMRC are now inviting agents to sign up to the private beta phase of the MTD for Income Tax Self-Assessment (ITSA) pilot. Having gone live from 22 April 2024, the pilot will give agents a chance to familiarise themselves with the requirements of digital record keeping and quarterly reporting. This pilot is likely to be at a relatively small scale initially, focusing on variety of sole traders/landlords rather than quantity, however the breadth of the intake will be increased from 2025/26.

There are eligibility restrictions for 2024/25 pilot. For example, those businesses with a year end of 31 March (as opposed to 5 April) can sign up, however those with jointly-owned property and furnished holiday lets are unable to do so at the moment. Further details of how to sign up, along with who is eligible can be found here.

Making Tax Digital (MTD) Webinar - April 2024

On 17 April 2024, Emma Rawson from the ATT and Chris Thorpe and Richard Wild from the CIOT hosted a webinar on MTD for ITSA. As well as a reminder of the current proposals taking effect from 2026, the webinar focussed on the recent changes to the MTD proposals in light of HMRC’s Small Business Review and the February 2024 amendments to the regulations.

Please click here for a link to view the webinar.
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See our Technical News section for the latest news on MTD for ITSA.