Making Tax Digital for Income Tax Self-Assessment – May 2024 update
Associate Director Martin Kerr provides an update on Making Tax Digital for Income Tax Self-Assessment and highlights the value of considering HMRC’s pilot scheme.
What are the income thresholds for Making Tax Digital for Income Tax Self-Assessment?
HMRC has indicated that Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) is progressing in a phased approach from April 2026. This will be for a specific group of taxpayers and will be followed by a second tranche of taxpayers a year later from April 2027.
HMRC has also confirmed that they are keeping under review the gross income limit at which an individual is required to comply with the record-keeping and quarterly submission rules.
Currently, there are three levels of income for the purposes of MTD for ITSA. These are determined by the taxpayer’s gross income from sole trader business and/or property rental income.
- Gross income over £50,000 per annum. These individuals will have to comply from April 2026.
- Gross income over £30,000 per annum. These taxpayers will have to comply from April 2027.
- Gross income of less than £30,000 per annum. These individuals will not have to comply with the new rules but HMRC intend to keep this under review.
How are the Making Tax Digital for Income Tax Self-Assessment thresholds calculated?
The gross income thresholds will be determined by the taxpayer’s income over the two years before inclusion in Making Tax Digital for Income Tax Self-Assessment. Therefore, individuals with gross income over £50,000 for the year ended 5 April 2025 will be expected to comply from April 2026.
HMRC is also introducing a new points-based penalty regime for non-compliance with the new MTD for ITSA rules. The system is similar to the new VAT penalty regime whereby late payment penalties are based on a percentage of outstanding tax owed.
There will be exemptions for taxpayers with the most common likely to be digital exclusion due to age or disability.
Pilot programme offers the chance to get used to new Income Tax Self-Assessment rules
HMRC is running a pilot programme for Making Tax Digital for Income Tax Self-Assessment. As it is a question of when, not if the new rules come into force, we encourage anyone meeting the criteria to consider joining the pilot.
The opportunity to become familiar with the process and methods of submission will be invaluable when it becomes mandatory. This is in addition to the likelihood of teething problems when the system is fully introduced and the potential for limited availability of support services given the volume of taxpayers who will be onboarded.
Making tax less taxing
The Making Tax Digital initiative is all about making tax less taxing. But tax can still be complicated, time-consuming and challenging for sole traders. The team at Consilium would be delighted to have an informal chat about any questions you have about income tax, Making Tax Digital for Income Tax Self-Assessment obligations and record keeping or the transition period.
To arrange an informal chat, contact Martin Kerr.
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