If you are a business owner that submits an income tax self-assessment, you would be more than aware of the upcoming Making Tax Digital transition. However, this has now been postponed until the 6th of April 2026. Learn more about the latest updates in our article.
The Latest Making Tax Digital Updates
The new Making Tax Digital (MTD) regime means that sole traders and individual landlords must store their business records digitally. They will also be required to send their business income and expenses summaries to HMRC at least once every quarter. You can find more information about the regime, what to expect and the latest updates below:
- What Is Making Tax Digital (MTD)?
- What Does MTD Mean For Businesses?
- Why Has MTD Been Delayed?
- What Is The New MTD Plan?
- What Are Your Responsibilities?
What Is Making Tax Digital (MTD)?
Implemented by the government, the Making Tax Digital (MTD) initiative is designed to improve the efficiency of tax administration. It encourages business owners to digitalise their accounts, allowing them to keep all information up to date and helping them track their business’s financial performance. This inevitably improves the accuracy of records and, therefore, reduces the amount of tax which is lost down to avoidable errors.
What Does MTD Mean For Businesses?
Making Tax Digital (MTD) was first announced in 2017 and has slowly been implemented. Since April 2019, only VAT-registered businesses earning over the threshold have been submitting their records via MTD, with more business types to follow in the coming years.
But how does the MTD initiative change processes for businesses? Under MTD rules, companies must keep digital records of all their transactions and submit VAT returns using MTD-compatible software. You can find a full list of compatible software on the GOV.UK website.
Depending on what works best for your business, you can save all transactions straight to MTD software or continue to use spreadsheets but use bridging tools to convert records into digital format. You can find more information on Making Tax Digital in our previous article.
Why Has MTD Been Delayed?
Originally, MTD for income tax self-assessment (MTD ITSA) was going to come into action from the 6th of April 2024; however, this has now been postponed to the 6th of April 2026. Why? Because the existing terms did not quite meet the needs of smaller businesses. The government has allocated extra time to review the MTD ITSA, tailor it to these business types and determine the best way for them to fulfil their income tax obligations.
Currently, there hasn’t been a date set for when partnerships will join the MTD ITSA initiative. As dates continue to be postponed, expanding MTD to corporation tax also seems a distant ambition; however, as always, we will keep you updated on any changes in our newsletter and blog page.
What Is The New MTD Plan?
For the first year of the MTD initiative (from April 2026 to April 2027), only businesses with an annual turnover of more than £50,000 will need to follow the MTD ITSA rules. From April 2027, this turnover will reduce to £30,000. The government will only set out plans beyond 2027 once they have completed their review and consulted with businesses, tax agents and others involved in the initiative.
What Are Your Responsibilities?
Regardless of the changes to MTD ITSA start dates, it is important to keep in mind that all incorporated businesses (including partnerships) will still need to report their profits to HMRC for the period that aligns with the tax year beginning on the 6th of April 2024.
Suppose your business uses an accounting period that does not end on the 31st of March, the 5th of April or a date between. In this case, you will likely be faced with complicated calculations for 2023-24, particularly if you are a partnership or seasonal business.
We can work with you to determine whether you would benefit from changing your accounting period. If you decide not to, we can also help you to assess the ongoing costs moving forward to keep your business operating efficiently.
Get In Touch To Book Your Appointment
The Making Tax Digital transition can be daunting, and there are many processes within your business you may need to re-evaluate. With many years of experience supporting all business types, scales and industries, our accountants can work with you to create a tailored plan of action moving forward. Please do not hesitate to contact us to book a consultation.