Concern over MTD extension plans
HRMC continues to move forward with its Making Tax Digital (MTD) policy which sits the heart of its transformation vision.
Draft legislation for inclusion in the government’s new Finance Bill was published at the end of July.
MTD for Income Tax is due to become mandatory for landlords and sole-traders with qualifying income more than £50,000 from April 2026.
The draft legislation, published at the end of July, included lowering the Income Threshold to £20,000 from April 2028.
However, that is a move that has been questioned by the Institute of Chartered Accountants in England and Wales (ICAEW).
Frank Haskew, the organisation’s head of taxation strategy, said: “We remain concerned about extending MTD income tax to those with turnover over £20,000 from April 2028.
“Lowering the threshold will add about one million taxpayers, mostly sole traders but notably including landlords who may have only one rental property.
“This will follow shortly after the first mandatory annual tax returns are due for those with turnover over £50,000, allowing little time to assess the impact of MTD income tax before it is extended.
“MTD income tax represents the most significant change in decades for sole traders and landlords, requiring digital record-keeping and filing quarterly updates and year-end tax returns via commercial software that meets HMRC’s requirements.
“HMRC will not provide software, so taxpayers must carefully choose from available products, many of which vary significantly and may not meet their needs. More preparation is needed from both HMRC and software developers.
“While we support digitalisation of accounting records, we don’t agree with mandatory quarterly updates which add cost without benefit.
“Instead, we’d like to see the retention of annual reporting with optional quarterly updates instead. As requirements begin in less than a year, agents and taxpayers must prepare.”
The legislation also confirms:
• exemptions and deferrals for certain groups of taxpayers
• simplification of the rules for those that choose calendar rather than tax year quarters, who will now have a start date of 1 April rather than 6 April
• HMRC’s power to cancel or reset late submission penalty points and cancel financial penalties
HMRC has also confirmed it is not proceeding with Making Tax Digital (MTD) for Corporation Tax.
In a statement in its newly published Transformation Roadmap, it said: “HMRC will modernise services for Corporation Tax (CT), beginning with a renewal of internal systems for CT to provide the foundation for future improvements. HMRC do not intend to introduce MTD for CT…”
Its focus will now turn to upgrading legacy internal systems, improving digital services incrementally, and working with stakeholders on alternative reforms tailored to the “diverse CT population”.
John-Paul Marks, HMRC’s first permanent secretary and chief executive, said: “HMRC will look very different by 2030. Almost all our straightforward customer queries will be handled digitally or automatically with at least 90 per cent of customer interactions being digital.”
• To discuss any tax issues please contact me on 01772 430000
