Making tax digital for income tax has been delayed until April 2026. This effects all self-employed individuals, landlords and partnerships.
We go through the announcement in detail so you can understand how the changes will affect your business.
Making tax digital is a HMRC initiative, which requires businesses to use software to maintain their record of income and expenses.
The most popular software providers on the market are Excel, Quickbooks, Sage and Xero.
From April 2024, all self-employed individuals and landlords were required to keep their records digitally.
The compliant software would produce earnings reports, which would be filed to HMRC each quarter.
The only exemption was if the business income was less than £10,000 or for those digitally excluded.
Yes. HMRC have postponed all making tax digital requirements for individuals until April 2026.
This is now the fifth delay to making tax digital for income tax. The original planned implementation date was 2018.
Making tax digital for self-employed and landlords has been delayed until April 2026.
From April 2026, all self-employed and landlords with income in excess of £50,000 will be required to keep records digitally. This is a much higher threshold than the original income of £10,000.
It is expected to affect 700,000 taxpayers.
From April 2027, the making tax digital income threshold will reduce from £50,000 down to £30,000.
All self-employed taxpayers and landlords with income in excess of £30,000 will be required to keep records digitally.
This is expected to affect a further 900,000 taxpayers.
There is currently no date set for those businesses with income under £30,000.
This has been delayed indefinitely but is under review.
Partnerships prior to this delay were expected to comply with making tax digital from April 2025.
This has been delayed to an as yet unknown date.
The full announcement is available on this link – https://www.gov.uk/government/news/government-announces-phased-mandation-of-making-tax-digital-for-itsa
Our thoughts on the delay to making tax digital for the self-employed and landlords
The delay has been universally welcomed by businesses and their advisors, including ourselves.
The main problem with the original April 2024 plan was the £10,000 threshold. At this low level of income the benefits of using software is unproven. As a result many businesses this size maintain paper records. The mandatory requirement to use software would have therefore been forced on businesses with widespread reluctance.
The new phased method, in which larger businesses are mandated first is a more logical approach. Most businesses with income in excess of £50,000 would benefit from using software. As a result, the decision to keep records digitally will occur voluntarily by most.
DISCLAIMER – Please note that the content contained in this article is for general information only and is not a substitute for professional advice – read our full disclaimer