Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) mandates that, from April 2026, self-employed individuals and landlords with an income of more than £50,000 will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software after the Treasury announced a two-year delay in December 2022.

As well as increasing the income threshold from £30,000 to £50,000 and the delay, the Treasury also announced:

  • that those earning more than £30,000 would join MTD ITSA from 2027
  • a “small business review” for landlords and sole traders earning less than £30,000 to see how MTD ITSA could be shaped to better meet their needs
  • Partnerships would not be brought into MTD ITSA in 2025 – they are expected to be brought into scope at some point, but as yet no date has been announced

Contributing to this “small business review”, the ICAEW has called for the planned quarterly reporting aspect to be dropped.

It is speculation at this point, but some suggest that:

  • those earning less than £30,000 could be removed from MTD altogether
  • those earning less than £10,000 could be removed from the scope of MTD
  • the Treasury should stick to their original plan, but drop the quarterly reporting requirement

The MTD ITSA pilot has been paused while HMRC considers the review submissions and its options going forward. We await an update, which is expected in the Summer.

Stuart Hulland, Partner at Bates Weston comments:

“The principles of Making Tax Digital are sound. Real time digital record keeping can bring great advantages for clients. If they share their data with us, we can advise them throughout the year on ways to improve their business, control their cash flow and anticipate their tax position. It also alleviates the pressure clients feel to collate, unpick and reconstitute their records for events that happened over 12 months ago.

We continue to encourage all clients to keep digital records and would like to see MTD ITSA implemented – but in a workable, tested format that brings real benefit to our clients, rather than adding unnecessary administrative burdens.”