PLANS for the roll-out of Making Tax Digital for Income Tax (MTD ITSA) will be delayed by a further two years from the intended start date of April 2024, to April 2026.

It is proposed that the transition to MTD ITSA will happen in two stages for individuals with business and/or rental income of £30,000 or more.

For those with business and rental income over £50,000 per annum, the roll-out will begin from April 2026.

And a year later - from April 2027 - it will begin for those with business and rental income over £30,000 per annum.

The government has confirmed that there will be a review to see how MTD ITSA could work effectively for smaller businesses and landlords with taxable income less than £30,000.

There will also be a review for partnerships where there are only individuals as partners, a move that will be subject to further consultation before any implementation.

Accountant Martyn Dobinson, of Saffery Champness says: “For those who are already enrolled in the MTD VAT scheme, much of the hard work has already been done.

"MTD ITSA will essentially mean a move to quarterly digital reporting of income and expenses, with reporting required to be returned within a month of the end of each quarter.

"Where the taxpayer has more than one business (or a combination of trading and property income, for example) they will need to make returns for each.

"For some this will mean a significant shift from what had been a single post year-end adjustment to an almost ‘real time’ allocation of income and expenditure.”

Taxpayers will also have to submit an end of period statement following their year-end that will incorporate relevant accounting and tax adjustments.

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This will finalise the business’ position for the year, although these adjustments can be included on a quarterly basis should the taxpayer wish to do so.

They will have until the normal self-assessment deadline to do this. Any other income and expenses that would currently be included in their self-assessment tax return will also need to be reported by the normal self-assessment deadline.

There are several stated exclusions from the new requirements, including trusts and deceased estates, Saffery Champness explains.

Partnerships where the partners are not all individuals, and Limited Partnerships and LLPs are also excluded, but only temporarily - it is expected that these entities will be brought within the requirements at a future date.

MTD for corporation tax was intended to follow MTD ITSA, with a pilot due to launch in 2024 and possible introduction from 2026.

Saffery Champness says that the deferral of MTD ITSA means this is unlikely to happen as scheduled.