HMRC has confirmed mandatory new rules for people earning £30,000 in 2027, before reducing the threshold so those earning over £20,000 are impacted a year later. The Labour Party government has confirmed how Making Tax Digital will change in 2027 and 2028.
Timeline for the new thresholds
From 6 April 2028, sole traders and landlords with a qualifying income over £20,000 in the 2026 to 2027 tax year will need to use Making Tax Digital for Income Tax. And from April 2027, Making Tax Digital will apply to those with qualifying income over £30,000.
Making Tax Digital for Income Tax Self Assessment requires businesses and landlords with qualifying income to maintain digital records and update HMRC each quarter using compatible software.
HMRC's rationale and the tax gap
Confirming the changes, the taxman said: "Making Tax Digital (MTD) will exploit the opportunities offered by digitalisation to make it easier for everyone to get tax right. Many other countries have already done this or have digital systems in development."
Errors in handling tax affairs contribute to the tax gap — the amount of tax that is due but goes unpaid. The tax gap for Self Assessment businesses is around 18.5%, or £5 billion.
"Using software to keep digital records and make regular updates has been shown to reduce the potential for error and time spent making corrections, and thus support business productivity."
Professional reactions to the rollout
Richard Hattersley, managing editor at AccountingWEB, was joined by Chris Downing, director for accountants and bookkeepers at Sage, Samantha Mitcham, owner of SJCM Accountancy, and Robyn Milstead, director of tax at LKA Chartered Accountants, who have previously issued their views on the Making Tax Digital system.
Mitcham said: "It’s a bit of an anticlimax because we’ve worked so hard for such a long time and as a profession, we’ve been under an immense amount of pressure to get this right, and we’ve put so much effort into it, and so to get this close and be met with HMRC and software issues is difficult."
"To sit there, knowing that as it stands, we’re struggling to get things over the line in the time that we’ve allocated to the jobs, and watch the staff be really stressed out – it’s very tough."
"It wasn’t just one catastrophic problem. It was lots of little problems stacking up on one another. Whether you had 10 clients or 100 clients, just three or four little niggles can really upset the workflow," Downing said.
Milstead said: "We had spent such a long time talking to the clients and coming up with individual plans for every one of them, so I didn’t have any particular problems."
Hattersley, meanwhile, said he had seen "bedraggled photos and people looking incredibly tired on LinkedIn" ahead of the changes this year, which apply to £50k earners.
