MTD for ITSA – a simplified system
TaxTalk - June 2024
Read time: 19 mins
In the autumn, the Government announced its review of the current system. Discover how this may ease the burden.
The plans include some design changes that aim to simplify and improve the system for taxpayers and their representatives. The Government is still committed to implementing the regime from 6 April 2026.
These updated proposals will introduce MTD for ITSA for the self-employed and landlords with income above £50,000 from 6 April 2026. It will apply to those with income over £30,000 from 6 April 2027.
There’s been no further update on the self-employed and landlords with income below £30,000, but this remains under review. Those who fall into this category will still be able to register voluntarily for MTD for ITSA.
Pilot and penalty regime
HMRC re-opened the MTD for ITSA pilot programme in April, offering more volunteers an opportunity to sample the MTD software and access its dedicated MTD support team ahead of the formal introduction in April 2026. If you think you may be interested in joining the pilot, please contact us and we can run through the details and help get you signed up.
HMRC has also introduced a reformed penalty regime for MTD for ITSA volunteers in the pilot programme from 6 April 2024 onwards. This means a user will incur a penalty point if they miss an annual submission deadline. If they reach the threshold of two points for late filing of their final submission, they will be liable to a fixed penalty of £200. The reform will also affect how penalties for late payment of tax are levied and will now consist of two separate charges:
- the first payable 30 days after the payment due date, based on a fixed percentage of the taxpayer’s outstanding balance owed
- the second accruing daily from 30 days after the payment due date, and based on the sum outstanding.
What changes have been introduced?
The Government has made alterations to the MTD for ITSA system, which aim to tackle problems highlighted during the initial pilot. These updates include:
- Amending the quarterly reporting process to work on a cumulative basis, rather than considering each quarter in isolation. This allows users to correct past errors as part of their next update, rather than amending previous submissions
- Enabling users to authorise more than one tax agent for MTD, allowing the quarterly reporting updates and the year-end final submissions to be performed by separate advisors
- Simplifying the reporting requirements for taxpayers with more complex affairs. For instance, landlords with jointly-owned rental properties can now keep less detailed digital records for those properties, and opt out of submitting quarterly updates of their rental expenditure
- Removing the requirement for all users to provide end of period statements, to reduce the administrative burden
- Exempting certain groups from MTD requirements. These include foster carers, for whom MTD for ITSA offers limited benefit. Those who do not have, and cannot obtain, a national insurance number are also excluded – as this often prevents users from accessing HMRC’s online services.
We will provide further updates as details are announced in the run up to implementation in April 2026. If you have any questions, or think you will be affected by MTD for ITSA and need guidance on how to prepare, please contact Karen Ozen or Jake Whittaker.