MTD expanded to include more taxpayers
The Chancellor’s recent budget brought several significant tax updates, but one less-publicised announcement will catch the eye of many in the accountancy profession. Plans to expand Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) to individuals earning over £20,000 have now been confirmed.
What’s changing?
Although the MTD ITSA scheme has yet to officially launch, the Government is already laying out its plans for a wider rollout. The Budget confirmed that individuals with trading and property income above £50,000 will be the first to join the system in April 2026. This will be followed by those earning between £30,000 and £50,000 in April 2027.
Now, a third group—those with incomes of £20,000 to £30,000—is also set to be mandated into MTD ITSA, with the timing of this phase to be outlined in a future fiscal update.
This signals the Government’s continued commitment to the MTD ITSA initiative, despite its significant implementation challenges.
Next steps and key considerations
While details are still emerging, it’s critical that the Government takes a measured approach to any further expansions of MTD ITSA. Before broadening the programme, the first year of implementation (starting April 2026) must be evaluated to understand its impact and address any issues.
Several important questions remain unanswered, including how the MTD rules will apply to joint property owners and the exact requirements for digital record-keeping.
Another pressing challenge is software availability. While recent additions to HMRC’s list of compatible software, including Xero, Quickbooks and Sage, have improved options, the overall testing and rollout have so far been limited. For MTD ITSA to succeed, HMRC must ensure the availability of free or low-cost user-friendly software that caters to unrepresented taxpayers, who will form a significant proportion of the £20,000 to £30,000 income group.
Preparing for 2026 and beyond
Although today’s announcement may disappoint those hoping for further delays or a cancellation of MTD ITSA, it does provide much-needed clarity. Agents, taxpayers, and software providers now have a clear mandate to begin preparing for what is set to be a major transformation in how income tax is reported.
With only 500 days until the first wave of taxpayers enters MTD ITSA, the countdown has truly begun. Here at Stepping Stones, we’re here to support you every step of the way, helping you navigate these changes with confidence. If you have any questions or need guidance on preparing for MTD ITSA, please don’t hesitate to get in touch. Please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk.
You can also book a free 20-minute call with Yarka – https://calendly.com/yarka-ssa/20min
