[UK] HMRC postpones Making Tax Digital for millions of self-employed

HMRC has postponed Making Tax Digital (MTD) income tax reporting for millions of UK small businesses and will raise the threshold to an income of £30,000 from April 2026, Small Business reports.

Millions of self-employed people now have a temporary reprieve regarding the filing of quarterly Making Tax Digital income tax returns.

HMRC has postponed the rollout of its Making Tax Digital system for millions of freelancers. Prior to this, any self-employed person earning more than £10,000 was reportedly required to start filing quarterly digital tax returns from April 2024.

The start date has now been pushed back to April 2026 and will only apply to self-employed people generating over £30,000 in income. Meaning millions of freelancers will not need to rent expensive software to remain compliant, for now.

For freelancers earning between £30,000 and £50,000, the new system will be postponed until April 2027. Any freelancer earning more than £50,000 will reportedly be granted a two-year extension until April 2026.

Currently, only businesses registered for VAT – those earning more than £85,000 a year – have to go through Making Tax Digital.

Small business owners have voiced their unhappiness about having to rent expensive accounting software from third-party vendors in order to file their online tax returns.

Changes to Making Tax Digital for the self-employed

HMRC has made the decision to suspend the rollout of Making Tax Digital for income tax due to problems with its own internal IT system and concerns over a lack of awareness of the reforms from microbusinesses.

Recent research by accounting software provider FreeAgent revealed that more than 50 per cent of small businesses thought the UK Government had not provided sufficient information about Making Tax Digital. While only one in ten small business owners was reportedly confident that they understood everything about the next stage of the legislation.

Roan Lavery - CEO and co-founder of FreeAgent - said, “Considering this general lack of awareness – and with time running out before the deadline for the next phase of the legislation [MTD for ITSA] was due to be implemented – it was always possible that the government would choose to postpone it. 

“There’s just no way that everyone affected would have been ready to comply with the changes in such a short space of time.”

Jim Harra - chief executive of HMRC - said that the changes had been paused to “make sure we get this right and deliver it effectively”.

Tax experts, however, described the U-turn as a blow to the department’s credibility.

HMRC stated that forcing people to declare earnings and pay their tax more regularly would have helped to vastly reduce the £32bn - or 5.1 per cent of the UK’s annual tax bill - that it reportedly claims is underpaid in tax each year.

It was HMRC’s intention to pilot MTD for corporation tax in 2024 and it was scheduled to roll it out in 2026. Paul Falvey - tax partner at business advisory firm BDO - told the Financial Times this may now “prove too big a risk” because it would coincide with the launch of MTD for income tax and would be “a lot of work for HMRC’s IT team to handle in one year”.

Speaking to the Financial Times, Tim Stovold - head of tax at accounting firm Moore Kingston Smith - said MTD is becoming “the Crossrail of tax reform”.

Source: Small Business

(Links and quotes via original reporting)

HMRC has postponed Making Tax Digital (MTD) income tax reporting for millions of UK small businesses and will raise the threshold to an income of £30,000 from April 2026, Small Business reports.

Millions of self-employed people now have a temporary reprieve regarding the filing of quarterly Making Tax Digital income tax returns.

HMRC has postponed the rollout of its Making Tax Digital system for millions of freelancers. Prior to this, any self-employed person earning more than £10,000 was reportedly required to start filing quarterly digital tax returns from April 2024.

The start date has now been pushed back to April 2026 and will only apply to self-employed people generating over £30,000 in income. Meaning millions of freelancers will not need to rent expensive software to remain compliant, for now.

For freelancers earning between £30,000 and £50,000, the new system will be postponed until April 2027. Any freelancer earning more than £50,000 will reportedly be granted a two-year extension until April 2026.

Currently, only businesses registered for VAT – those earning more than £85,000 a year – have to go through Making Tax Digital.

Small business owners have voiced their unhappiness about having to rent expensive accounting software from third-party vendors in order to file their online tax returns.

Changes to Making Tax Digital for the self-employed

HMRC has made the decision to suspend the rollout of Making Tax Digital for income tax due to problems with its own internal IT system and concerns over a lack of awareness of the reforms from microbusinesses.

Recent research by accounting software provider FreeAgent revealed that more than 50 per cent of small businesses thought the UK Government had not provided sufficient information about Making Tax Digital. While only one in ten small business owners was reportedly confident that they understood everything about the next stage of the legislation.

Roan Lavery - CEO and co-founder of FreeAgent - said, “Considering this general lack of awareness – and with time running out before the deadline for the next phase of the legislation [MTD for ITSA] was due to be implemented – it was always possible that the government would choose to postpone it. 

“There’s just no way that everyone affected would have been ready to comply with the changes in such a short space of time.”

Jim Harra - chief executive of HMRC - said that the changes had been paused to “make sure we get this right and deliver it effectively”.

Tax experts, however, described the U-turn as a blow to the department’s credibility.

HMRC stated that forcing people to declare earnings and pay their tax more regularly would have helped to vastly reduce the £32bn - or 5.1 per cent of the UK’s annual tax bill - that it reportedly claims is underpaid in tax each year.

It was HMRC’s intention to pilot MTD for corporation tax in 2024 and it was scheduled to roll it out in 2026. Paul Falvey - tax partner at business advisory firm BDO - told the Financial Times this may now “prove too big a risk” because it would coincide with the launch of MTD for income tax and would be “a lot of work for HMRC’s IT team to handle in one year”.

Speaking to the Financial Times, Tim Stovold - head of tax at accounting firm Moore Kingston Smith - said MTD is becoming “the Crossrail of tax reform”.

Source: Small Business

(Links and quotes via original reporting)