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Government delays MTD ITSA for two more years

Updated: Jan 30

Woman Working on Report

On the 19th December 2022, Financial secretary to the Treasury Victoria Atkins released a ministerial statement setting out adjustments to the scope and timing phases of MTD ITSA:

A two-year delay until April 2026 for mandatory MTD ITSA filing.

  • Minimum income reporting level increased to £50,000, with those earning more than £30,000 mandated to join the scheme in 2027.

  • The situation for landlords and sole traders earning less than £30,000 will be reviewed to see if MTD ITSA can be shaped to meet the needs of smaller businesses.

  • Partnerships will not be brought into MTD for ITSA as previously planned in 2025.

  • Points-based penalty system to be extended to MTD ITSA filers when they join.

While Atkins said the government remains committed to introducing MTD for ITSA to partnerships, the decision on when they might join the scheme will be taken at a later date, as well as for those on less than £30,000.

“The government understands businesses and self-employed individuals are currently facing a challenging economic environment, and that the transition to MTD for ITSA represents a significant change for taxpayers, their agents, and for HMRC,” the minister wrote.

To maximise the benefits of MTD for small businesses, the government opted to allow more time to prepare, “so that all businesses, self-employed individuals, and landlords within the scope of MTD for Income Tax, but particularly those with the smallest incomes, can adapt to the new ways of working.”

Key issues still unresolved of MTD for businesses

In the intervening time, HMRC responded to some of the criticisms by bringing in experienced tech managers to steer the project in the right direction. Software industry insiders suggested that with the issues outstanding, and potential complications of a general election and civil service purdah, a one-year delay wouldn’t work, so it was a choice between either two years or nothing.

Coincidentally, Sage CEO Steve Hare published an article in The Times last Wednesday commenting on the widespread MTD delay rumors: “We are now hearing that Making Tax Digital could once again be pushed back further,” he wrote.

“I understand that some have concerns about the pace of change. However, I am of the view that further delay would be a serious mistake. In addition to the vast productive benefits for small businesses, the opportunities for the government are clear, too: more accurate live data on what is going on in the real economy as well as being better able to track the small minority who make inaccurate declarations and ultimately close their tax gap.”

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