The Government is set to delay introducing its Making Tax Digital self-assessment tax system for the self-employed and microbusiness owners until April 2026.
Previously, the Treasury was due to drag 4.2 million self-employed workers and small businesses into filing quarterly Making Tax Digital returns from April 2024.
Only in September 2021, the Treasury announced the deadline for MTD would be postponed for 12 months from April 2023 to 2024.
>See also: Making Tax Digital for VAT: The closure of VAT online accounts
The reason, according to an exclusive in the Times, is that HMRC computer systems are not ready, despite Making Tax Digital being first announced in early 2015.
Now from April 2026 any self-employed person or micro-business earning more than £10,000 a year will have to keep accounting records digitally and then file quarterly updates to HMRC using new software, instead of an annual return at present.
The reason is that digital records and software help reduce common mistakes, so the self-employed and small business owners do not pay too little or too much. MTD reduces scope for error by implementing automation and error checks that help improve accuracy.
>See also: 9 myths about Making Tax Digital busted
However, small business owners already enrolled in MTD complain about the amount of time wasted filing digital tax returns, plus the cost of having to use costly MTD-compliant software, which can only be rented from approved software providers.
HMRC believes that by rolling out MTD to the self-employed and the smallest businesses will help recover the £32bn the taxman believes is underpaid each year – or 5.1 per cent of the country’s tax annual tax haul.
Further reading
Basis period reform and Making Tax Digital: Everything you need to know
