UK’s His Majesty’s Revenue and Customs (HMRC) expects that 2,916,000 (42%) will need to comply with Making Tax Digital (MTD) for income tax of the 7,020,000 taxpayers with income from self-employment or property, that were within income tax self assessment (ITSA) for 2023/24.
The Institute of Chartered Accountants in England and Wales (ICAEW) Tax Faculty has assessed the latest figures released by HMRC regarding MTD for income tax, detailing the implications for taxpayers, agents, and HMRC.
HMRC has updated its estimates concerning the number of taxpayers expected to comply with MTD for income tax, based on income tax self-assessment (ITSA) returns for the 2023/24 tax year, which will be collected until 31 March 2025.
The data categorises taxpayers by various characteristics, including agent representation, and is subject to rounding.
The 2023/24 tax year is noted as a transitional period in the shift from basis periods to a tax year basis, which may have resulted in increased trade income for some taxpayers.
The final number of taxpayers required to comply with MTD will depend on the information available for the relevant tax year.
Taxpayers within the scope of MTD for income tax will be required to use software for maintaining accounting records and for submitting quarterly updates and an end-of-year tax return to HMRC.
Compliance is mandatory only for those with total gross income from self-employment and property exceeding £20,000.
The implementation timeline is as follows: April 2026 for those with total gross income over £50,000 in 2024/25; April 2027 for those exceeding £30,000 in 2025/26; and April 2028 for those surpassing £20,000 in 2026/27.
Taxpayers not within the MTD scope may choose to volunteer for it.
According to HMRC’s data, 864,000 (30%) are expected to comply from April 2026, 1,077,000 (37%) from April 2027, and 975,000 (33%) from April 2028. This figure updates HMRC’s previous estimate of 2,700,000 taxpayers.
According to HMRC, 2,353,000 (81%) of those expected to be subject to MTD for income tax are self-employed, including 313,000 who also earn income from property.
Of the 563,000 in-scope taxpayers who are landlords without self-employment income, 47% (263,000) are projected to join in April 2028, indicating a slower integration for landlords compared to self-employed individuals.
While a majority of in-scope taxpayers are represented by an agent (1,900,000; 65%), a significant portion (1,018,000; 35%) are unrepresented.
Additionally, most unrepresented in-scope taxpayers do not use commercial software for filing their tax returns (840,000; 83%). It remains uncertain how many of those using software for filing also utilise it for record-keeping.
