The NFU has engaged extensively with HMRC on Making Tax Digital for Income Tax over the last few years.
We have raised concerns over:
- timescales for implementation
- the need for a robust pilot phase to identify problem areas
- additional complexity resulting from Basis Period Reform for many farmers
- the level of complexity with MTD reporting for diversified farms.
Announcing the delay, HMRC Chief Executive and First Permanent Secretary Jim Harra said: “A phased approach to mandating MTD for Income Tax will allow us to work together with our partners to ensure that our self-employed and landlord customers can make the most of the opportunities this will bring.
The government statement explains that self-employed individuals and landlords are currently facing a challenging economic environment. The transition to MTD for ITSA, represents a significant change to taxpayers and HMRC for how self-employment and property income is reported; because of this the government is giving a longer period to prepare for MTD.
The mandatory use of software is therefore being phased in from April 2026, rather than April 2024.
Mandatory digital records
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.
Those with an income of between £30,000 and £50,000 will need to do this from April 2027.
Early adoption recommended
Most customers will be able to join voluntarily beforehand, meaning they can eliminate common errors and save time managing their tax affairs.
The government has also announced a review into the needs of smaller businesses, particularly those under the £30,000 income threshold.
The review will consider how MTD for ITSA can be shaped to meet the needs of these smaller businesses and the best way for them to fulfil their Income Tax obligations.
It will also inform the approach for any further rollout of MTD for ITSA after April 2027.
Mandation of MTD for ITSA will not be extended to general partnerships in 2025 as previously announced. The government remains committed to introducing MTD for ITSA to partnerships in line with its vision set out in the Tax Administration Strategy.
The NFU, therefore, welcomes this announcement and the additional time it will give to resolve our concerns.
We particularly welcome the review into the needs of smaller businesses and will continue to discuss our concerns and proposed solutions with HMRC in the coming months.