Despite the latest extension to the implementation of MTD for ITSA, if you’re a business owner or landlord, there’s still plenty for you to do now to prepare and make life easier in the long run.

When will it be introduced?

MTD for ITSA was initially due to come into effect from April 2018. This proved to be too ambitious a target for HMRC and has been delayed several times. In December 2022, HMRC announced that MTD for ITSA will be postponed to April 2026. 

As well as the additional two years to prepare, mandation will also be phased in subject to the taxpayer’s income.

While there is some frustration about another delay, the general consensus is that neither HMRC or the public would have been ready to meet the planned April 2024 date. Together with the increased income thresholds, the announcement has been welcomed by the tax industry.

HMRC is continuing with the basis period reforms from the 2024/25 tax year, which requires those businesses to align their accounting period with the tax year (or 31 March). The further delay of MTD for ITSA allows those businesses to have a 24 month bedding in period with their new accounting periods, before also having to comply with MTD for ITSA.

For partnerships, HMRC announced MTD for ITSA will not apply from April 2025, as originally planned, but have not announced a new start date. Also, the status of MTD for Corporation Tax  remains unclear at this stage.

What will MTD for ITSA require?

The starting date for MTD for ITSA will be phased in subject to the taxpayer’s income:

• April 2026 for those with gross self-employment and property income in excess of £50,000; and

• April 2027 for those with gross self-employment and property income in excess of £30,000.

If you’re a business owner or landlord with gross self-employment and property income in excess of the above thresholds, you‘ll be required to keep income and expense records digitally and to submit records directly to HMRC using MTD compatible software. Rather than filing one self-assessment tax return, you’ll submit six submissions to HMRC per year, which will potentially require more time and resource than before. If you have other sources of income, such as investment income, foreign source income or capital gains, these will all be captured in the final declaration.