Learn lessons of MTD roll-out before bringing in lowest earners
A well-functioning digital system and a range of free software are vital before those on the lowest incomes are brought into the Making Tax Digital for Income Tax (MTD) regime, says the Association of Taxation Technicians.
Statistics released by HMRC this week1 reveal that 864,000 sole traders and landlords are expected to be in the first wave of taxpayers mandated to keep digital records and submit quarterly updates to HMRC from April next year, rising to almost 3 million as lower income individuals are included by April 2028.
However, there is no indication of when, or if, self-employed individuals and landlords with income before expenses less than £20,000 – a further 4 million – will be brought into the MTD regime.
The ATT says lessons must be learned from the initial waves of MTD to help reduce the financial and administrative burdens on those with the lowest incomes, but deferring this for too long risks stranding this group on older HMRC platforms and with a less favourable penalty regime.
Jon Stride, chair of the ATT’s Technical Steering Group, said:
“The stats released this week make for interesting reading. However, they also throw up some questions. It is clear HMRC will need to identify and resolve any issues from the earlier cohorts before rolling MTD out further.
“Bringing in those with income less than £20,000 has its own issues. The additional costs and admin of quarterly reporting are more disproportionate for this group, given the smaller scale of business and lower levels of taxable profit. Waiting too long risks a divide, with more than 4 million taxpayers left on an older, stricter system.
“It is essential to know that the system works, and to have a range of free software available before bringing in those on lower incomes.”
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