If you’re unsure about the current state of Making Tax Digital (MTD), that’s understandable – and you are certainly not alone. Since its inception, there have been a number of changes and delays that have affected its rollout.
But MTD is here to stay and changes that will expand the programme, affecting more individuals and businesses, are coming. So if you’re wondering “What is going on with MTD?”, this article will help.
MTD for VAT
MTD for VAT, the first stage of the Government scheme, is now a legal requirement for most VAT-paying businesses across the country.
Gradually rolled out since 2019, this part of the scheme requires VAT-registered businesses (with a few exemptions) to digitally record and report their VAT returns to HMRC.
Every financial quarter, a VAT-paying business will need to file its returns and make any outstanding tax payments via MTD-compatible software.
MTD for ITSA
The next stage in the scheme’s rollout will be Making Tax Digital for income tax self-assessment (MTD for ITSA).
Originally set to launch in April 2024, MTD for ITSA will require sole traders and landlords to register and file their returns digitally, just like MTD for VAT. But in December 2022, the Government announced that MTD for ITSA will be delayed until April 2026, giving self-employed earners more time to prepare for the switch.
As well as pushing the launch date back, HMRC updated the income thresholds for anyone expected to start using MTD for their self-assessment tax returns.
Originally, sole traders and landlords with an income of £10,000 or more would have been required to start filing their returns on a quarterly basis via MTD software. Now, as of April 2026, anyone with a taxable income of more than £50,000 will need to keep records and file their returns on a quarterly basis with HMRC. Those with an income between £30,000 and £50,000 won’t need to join the scheme until 2027.
Anyone affected by these changes can voluntarily register for MTD for ITSA before these dates to prepare for the inevitable transition.
HMRC is yet to announce a mandate for general partnerships and businesses earning under £30,000.
Why was MTD for ITSA delayed?
The delay to MTD for ITSA was originally announced on 19 December 2022, with HMRC stating that it was for the benefit of everyone involved, including:
- taxpayers
- tax agents
- software developments
- HMRC itself.
At the time, Victoria Atkins, financial secretary to the Treasury, said:
“It is right to take the time to work together to maximise the benefits of Making Tax Digital for small businesses by implementing the change gradually.
“Smaller businesses, in particular, should be able to experience the benefits of increased digitalisation of Income Tax in a way which meets their needs.”
Since then, the Government has reminded taxpayers that it is still fully committed to the rollout of the scheme and stands firmly behind the benefits of digitalisation.
MTD for corporation tax will also be delayed (it was originally expected to be mandated in April 2026).
What you can do
Although these delays may take the immediate pressure off you and your business, there’s no reason why you cannot still prepare for the launch. Digitising your tax records can help you get into the habit before it becomes a legal requirement.
We believe digitisation is the future for your business, so there’s no time like the present to get used to the upcoming changes.
For advice on the best ways to prepare for MTD, or for help with your MTD for VAT reporting, get in touch with a member of our team.