The Government’s ambitious initiative, Making Tax Digital (MTD), is revolutionising the way tax reporting is conducted.
This transformative process began with VAT-registered companies, which are now mandated to report their VAT to HM Revenue & Customs (HMRC) using authorised digital software.
Originally, Income Tax Self-Assessment (ITSA) reporting was scheduled to undergo the same digital transition in April 2024, but the Government has since granted a two-year extension.
MTD for ITSA will now be progressively implemented starting April 2026:
The extension offers self-employed workers, sole traders, and landlords valuable time to adapt to the forthcoming changes.
It’s crucial to seize this opportunity and start preparing for the digital transition now.
What changes lie ahead?
From the new initiation date, MTD for ITSA will apply to all self-employed workers and landlords with property and/or business income exceeding £50,000.
Those who meet these criteria must maintain digital records and submit quarterly income and expenditure updates to HMRC via MTD-compatible software.
Additionally, taxpayers with income ranging from £30,000 to £50,000 will need to comply with these requirements beginning April 2027.
However, all taxpayers have the option to voluntarily join the program beforehand, which can help minimise errors and streamline tax management.
How does this impact partnerships?
Contrary to previous announcements, MTD for ITSA will not extend to general partnerships in 2025.
Nevertheless, the Government is dedicated to incorporating MTD for ITSA into partnerships, aligning with its vision outlined in the Tax Administration Strategy.
While the original plan also included an extension to Corporation Tax, the Government has yet to confirm when this final phase will commence.
Though 2026 might seem distant, it’s essential to prepare for the changes to self-assessment reporting well in advance.
What can you do to get ready?
Many of our clients have already adopted cloud-based accounting packages as part of our services.
These packages not only ensure your business is future-proofed for the upcoming MTD requirements but also enhance overall efficiency.
To learn more about how you can prepare for the digital tax revolution.
