MAKING TAX DIGITAL – WHAT’S NEW?

HMRC are pushing ahead with the implementation of Making Tax Digital (MTD) for Income Tax, set to commence from 6 April 2026. Legislation Day saw the publication of draft MTD legislation, which makes the following recently-announced changes to the planned regime:

• More individuals will be exempt from MTD – Ministers of religion, Lloyds underwriters, recipients of Blind Persons’ Allowance and donors of Power of Attorney.
• Certain kinds of income will be outside the scope of the MTD rules, namely Qualifying Care Income (e.g. foster care income) and the UK earnings of non-resident entertainers and sportspeople who have no other sources of income caught by the MTD rules.
• The requirement to use MTD-compatible software to file the individual’s year end tax return.
• A new concept introduced in the draft MTD Regulations is ‘latency’, which is the term being used for the concept of a newly-commenced trade or property business not being subject to the MTD rules until 6 April following the tax year in which a filing obligation arose for the tax year of commencement. As an example, if a trader is mandated into MTD in 2026/27 because of her property income, then starts a new trade in December 2026, 2027/28 is the year in which the filing obligation (31 January 2028) arises for the year of commencement and she will need to start complying with MTD rules for the new trade from 6 April 2028.

MAKING TAX DIGITAL – WHAT’S NEW?

HMRC are pushing ahead with the implementation of Making Tax Digital (MTD) for Income Tax, set to commence from 6 April 2026. Legislation Day saw the publication of draft MTD legislation, which makes the following recently-announced changes to the planned regime:

• More individuals will be exempt from MTD – Ministers of religion, Lloyds underwriters, recipients of Blind Persons’ Allowance and donors of Power of Attorney.
• Certain kinds of income will be outside the scope of the MTD rules, namely Qualifying Care Income (e.g. foster care income) and the UK earnings of non-resident entertainers and sportspeople who have no other sources of income caught by the MTD rules.
• The requirement to use MTD-compatible software to file the individual’s year end tax return.
• A new concept introduced in the draft MTD Regulations is ‘latency’, which is the term being used for the concept of a newly-commenced trade or property business not being subject to the MTD rules until 6 April following the tax year in which a filing obligation arose for the tax year of commencement. As an example, if a trader is mandated into MTD in 2026/27 because of her property income, then starts a new trade in December 2026, 2027/28 is the year in which the filing obligation (31 January 2028) arises for the year of commencement and she will need to start complying with MTD rules for the new trade from 6 April 2028.

HMRC’S TRANSFORMATION ROADMAP

On 21 July 2025, HMRC launched their Transformation Roadmap, which sets out ambitious plans for HMRC to become a digital-first organisation by 2030, with 90% of customer interactions taking place digitally. This compares to 76% as at today. HMRC will automate tax wherever possible and offer new digital self-serve options across a number of tax regimes.

It is estimated that the plans will save HMRC £50 million a year, including by moving customer letters and reminders to a digital-first approach and reducing the reliance on paper correspondence by 2028/29. Paper post provision will remain for critical correspondence and for the digitally excluded.

The Transformation Roadmap sets out timescales for delivery and HMRC is committed to reporting on progress. Work is underway to deliver some of the measures set out in the roadmap this tax year, including:

• improving Self Assessment registration service and streamlining the exit process for those customers who no longer need to file a Self Assessment tax return.
• a new service to give employed parents, who are newly liable for the High Income Child Benefit Charge, the choice to pay it directly through their tax code without needing to register for Self Assessment.

• launching an enhanced reward scheme for informants, targeting information on serious non‑compliance in large corporates, wealthy individuals, offshore and avoidance schemes.

Longer-term improvements include:

• From April 2026, the pre-population of Self Assessment tax returns with Child Benefit data.
• From 2027-28, digitising the inheritance tax service.
• Simplifying payments and refunds, including direct bank repayments and easier National Insurance contribution refunds.
• Single Customer Account Programme to provide a unified view of the taxpayer’s overall income and tax position in their digital account.

Lastly, in what will come as good news to many, HMRC announced that MTD for Corporation Tax will not be implemented.