In a move that surprised few industry insiders, the Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) programme has once again been pushed back, this time by another two years, the Treasury confirmed on 19 December 2022.
In a written statement, financial secretary to the Treasury Victoria Atkins confirmed that:
- the mandation of MTD for ITSA will now be introduced from April 2026, with businesses, self-employed individuals, and landlords with income over £50,000 mandated to join first;
- those with income over £30,000 will not be required to join until April 2027;
- there will be a review and consultation about whether and how to bring the smallest businesses - those with annual income under £30,000 - into MTD for ITSA;
- no new timescale has been given for when partnerships will be brought into the regime, although the government has said it remains committed to introducing MTD for ITSA to partnerships "at a later date";
- a new penalty system, harmonising late submission and late payment penalties for Income Tax Self-Assessment with those for VAT, will come into effect for taxpayers when they become mandated to join MTD; Income Tax Self-Assessment taxpayers outside the scope of MTD will be brought into the regime after its introduction for MTD taxpayers.
It will not be entirely surprising if the scope of the programme and the timetable for implementation are subject to further changes in the coming months. Many commentators continue to argue for an alignment with VAT thresholds, so that MTD for ITSA would be mandated only for traders/ businesses with annual incomes over the VAT registration threshold (currently £85,000) - a view that the author supports.