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Making Tax Digital… but not yet 

  • 3 min read
  • 31 Jan 2023
Making Tax Digital Changes

Yes, the news is as true as the sky is blue. The Making Tax Digital rollout for the self-employed, landlords and small business owners has been delayed… again. For another two years to be precise. 

Let’s get into what happened, why it happened and what HMRC is saying about MTD’s future. 

Firstly, what is Making Tax Digital?

In short, it’s the government’s plan to switch UK personal taxes over from paper to completely digital.

The scheme was launched in 2019, initially for VAT-registered businesses making £85,000 or more. By 2022, all VAT businesses were to switch over to MTD. 

Originally, self-employed folk, landlords, and small business owners were to file quarterly taxes with MTD-compatible software by 2024. But that’s now been pushed to 2026.

Don’t worry, if you’re already a TaxScouts user (hey friend 👋) then we’ll have a smooth rollover. We’ll announce closer to the ever-moving time… 

Who is MTD for?

Right now, MTD is still only for VAT-registered businesses. Heads up – if that’s you and you haven’t signed up for MTD already, you need to. Pronto. Otherwise, you could face penalties.

Eventually, it’ll be for everyone who needs to file a tax return or pay VAT.  

So if you already file a tax return, you can be sure MTD will apply to you.

The switch over to MTD affects business owners, landlords and the self-employed. 

What are the key changes for MTD?

There are two main changes that come with the MTD freeze announcement. 

Firstly, the rollout for landlords and the self-employed will be delayed by another two years, so Income Tax Self Assessment (ITSA) MTD will go live from April 2026. 

Secondly, everyone who previously had to file quarterly taxes by 2026 won’t have to anymore. 

Anyone earning over £10,000 in untaxed income would have had to file using MTD. But HMRC have now introduced a tiered system which means depending on what you earn, you may not need to file using MTD until later on. 

If you’re wondering why HMRC decided to slow the rollout, they stated that they understand the “challenging economic environment, and the transition to Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) represents a significant change to taxpayers” and decided to push it back.

What do tiered incomes mean?

It means you’ll need to use the MTD system according to your earnings.

Businesses, landlords and self-employed people earning:

  • More than £50,000 will have to file their taxes using MTD by April 2026
  • Between £30,000 and £50,000 will have to switch to MTD by April 2027

Regulations for businesses, landlords and self-employed people earning less than £30,000 haven’t yet been announced. But HMRC is looking into how to make sure that the change in the tax system isn’t tolling or troubling for smaller businesses/lower earners.

All VAT-registered businesses should now use MTD software to file their taxes as of April 2022, even if they earn less than £30,000.

When will MTD officially roll out?

Like we said, VAT-registered companies are already declaring and paying their taxes this way. 

The landlords, self-employed folk, and business owners earning over £50,000 will need to file their taxes through MTD as early as April 2026. 

So, two years from the original April 2024 date and three years from when this was written (2023). 

Does that mean I won’t need to switch over to MTD?

Kind of. It just means that you won’t need to switch over just yet. But everyone will have to switch over – it’s just a matter of when.

Unless you’re digitally exempt, everyone who falls under the categories we mentioned will need to switch over to Making Tax Digital as it will replace the current Self Assessment system. 

If you’re self-employed, a landlord, or a business owner (not VAT-registered) then you’ll have to wait until 2026 to see if MTD goes ahead and for what tiers.

Either way, you know we’ll be here to update and support you when it does!

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