What You Need To Know: Making Tax Digital for Income Tax Self-Assessment (ITSA)

One of the most significant updates in the wider Spring Statement document (but, interestingly, not included in Reeves' speech), was the confirmation of the phased rollout of Making Tax Digital for Income Tax Self-Assessment (ITSA).

From April 2026, the scheme will apply to sole traders and landlords earning over £50,000 and for those earning over £30,000 in 2027.  Now, this is expanding to those with income above £20,000 by 2028.

This gradual lowering of the threshold means around 900,000 sole traders will be brought into the MTD regime by 2028.

As part of this scheme, HMRC will be cracking down on late payments of both VAT and Self-Assessments.

Previously taxpayers would incur a penalty of two per cent of the tax owed if the outstanding tax was not paid within 15 days and four per cent if the tax was not repaid within 30 days.

Now, taxpayers within the MTD scheme will face a 3 per cent charge on any outstanding tax if it remains unpaid after 15 days, with a further 3 per cent added if the amount is still overdue at 30 days.

In addition, the annualised interest rate applied to late payments will more than double – rising from the current 4 per cent to 10 per cent.

Those who are yet to react to MTD for ITSA due to the small scale of their business operation will now need to act quickly to avoid being caught outside of the scheme in the years to come.

With thanks to our friends at "Seymour Taylor" for providing an insightful update on what we can expect with the changes to the Making Tax Digital for Income Tax Self-Assessment (ITSA). If you would like to be connected to Seymour Taylor, please feel free to reach out to Suzanne Curry at suzanne.curry@stca.co.uk.

Alternatively, Choice Business Loans is happy to discuss your requirements and make an introduction. 

Contact us at 01494 410125 or email: info@choicebusinessloans.co.uk