The government has made this change in light of the “challenging economic environment” faced by these groups, giving them longer to prepare.
MTD aims to simplify and digitalise how self-employment and property income is reported by sending records directly to HMRC and also encourages keeping digital accounts.
From April 2026, self-employed people and landlords with an income of more than £50,000 will be required to use software that is compatible with MTD to keep digital records and update their income and expenditure quarterly. This will come into force for those with an income of between £30,000 and £50,000 by April 2027.
The government will also hold a review into the needs of smaller businesses, with a focus on those earning less than £30,000. It will look at how MTD for Income Tax Self Assessment (ITSA) can be adapted to be more effective for smaller firms and inform the approach for the rollout after April 2027.
‘Important to ensure MTD works for everyone’
Victoria Atkins, Financial Secretary to the Treasury, said: “It is right to take the time to work together to maximise the benefits of MTD for small businesses by implementing the change gradually. It is important to ensure this works for everyone: taxpayers, tax agents, software developers, as well as HMRC.
“Smaller businesses in particular should be able to experience the benefits of increased digitalisation of income tax in a way which meets their needs. That is why we are also today announcing a review to establish the best way to achieve this.”
Jim Harra, chief executive and first permanent secretary at HMRC, said: “HMRC remains committed to the delivery of MTD as a critical part of our strategy for digitalising and modernising the tax system, but we want to make sure we get this right and deliver it effectively.
“A phased approach to mandating MTD for income tax will allow us to work together with our partners to make sure that our self-employed and landlord customers can make the most of the opportunities this will bring.
“The announcement relates to MTD for ITSA only. Making Tax Digital for VAT has already been implemented and is demonstrating the benefits to businesses and the tax system of digital ways of working.”
