MTD for Income Tax Self-Assessment: A Call for Collaborative Reconsideration

The current implementation plan for Making Tax Digital (MTD) for Income Tax Self-Assessment fails to address the concerns of taxpayers, agents, and HMRC. Its rigid adherence to outdated decisions, escalating costs, and potential administrative burdens necessitate a comprehensive review and collaborative effort to formulate a more realistic and effective approach.

The proposed MTD framework, with its annual returns and 4 quarterly statements, places an undue burden on self-employed individuals and landlords with income exceeding £50,000.

While HMRC touts the benefits of digitisation in reducing errors and narrowing the tax gap, the increased reporting frequency and potential software limitations are likely to lead to the opposite effect.

We echo the National Audit Office's concerns regarding the inadequate consideration of compliance costs for businesses and agents. The current proposals, if implemented without careful scrutiny, could further strain HMRC's service levels and compound existing challenges.

A recent CIOT/ATT survey revealed widespread apprehension within the business community, with 70% of respondents deeming the April 2026 start date unrealistic and 95% lacking confidence in HMRC's oversight capabilities. These findings underscore the need for a collaborative approach to reshape MTD into a truly beneficial and workable system.

Similar to many other organisations, we urge the government to use the Autumn Statement as an opportunity to initiate a thorough review of MTD, followed by in-depth consultations with affected individuals and businesses. This review should encompass a comprehensive assessment of MTD's impacts and advantages, ensuring that any implementation aligns with the needs and realities of taxpayers, agents, and HMRC.

Level of disruption does not outweigh benefit

Friend Partnership understands that any changes whether digital or not, will always cause some disruption and additional costs at the outset. We also recognise that the level of disruption without proper implementation will prove more disruptive than the benefits.

Should the government wish to pursue the April 2026 implementation date, could it not, for example, initially require only those with self-employed income exceeding £150,000 to be registered, followed annually by those on income above £100,000 and £50,000. Implementing in such a staggered manner would potentially minimise kinks in the system for those that can least afford errors.