Relief for 4.2m taxpayers as HMRC confirms delay to Making Tax Digital for income tax
Commenting on the news that HMRC is to delay the introduction of Making Tax Digital for Income Tax until 2026, Paul Falvey, tax partner at accountancy and business advisory firm BDO said: “There was a certain inevitability about the further delay to the introduction of Making Tax Digital for Income Tax Self Assessment. The lack of available software and pilot testing meant it wasn’t viable for this project to launch as planned in 2024.
“This will come as a relief to the estimated 4.2m taxpayers with business or property income over £10,000, including landlords, sole traders and partnerships. They had been due to file five returns from 2024 and be obliged to purchase new tax software.
“Instead, there will be a phased introduction from 2026 for those self-employed individuals and landlords with an income of more than £50,000, followed by a 2027 start for those with an income above £30,000. This seems like a more realistic approach.
“However, there seems to have a been quite a significant rethink about which taxpayers will be in scope for this project as the government has announced a review for those taxpayers falling under the £30,000 income threshold. This might be a recognition that the filing obligations may be too onerous for those on lower incomes.
“The big question now is whether HMRC will stick to its timetable for launching Making Tax Digital for Corporation Tax. This was due to be piloted in 2024 and rolled out in 2026, but this may now prove too big a risk if it were to coincide with the launch of MTD for Income Tax. This is a lot of work for HMRC’s IT team to handle in one year.
“The roll-out of Making Tax Digital is fundamental to modernising the tax system and it’s disappointing that there are further delays but it is important that the government gets it right. HMRC’s stated ambition is “to make the UK one of the most digitally advanced tax administrations in the world” but this looks a long way off. Making Tax Digital for VAT, which eventually launched in 2019, is now operating well, so there are certainly benefits to be gained from the new system – both for the government and for taxpayers.”
