Spring Statement 2025: Making Tax Digital

Making Tax Digital (MTD) was first announced ten years ago in 2015 with MTD for VAT fully implemented in 2022. MTD for Income Tax has been subject to considerable delays but following the 2024 Autumn Budget, the Government made a firm announcement that MTD for Income Tax will go ahead from April 2026. 

So what exactly does MTD mean and who is impacted by these rules? 

MTD is a move to digital record keeping, with the requirement to make quarterly updates to HMRC and a year-end declaration of income. All of this is undertaken via digital links. 

From April 2026, MTD will apply to self-employed individuals and landlords with combined gross income over £50,000. This means all income from trading and property before the deduction of any expenses. 

From April 2027 the gross income threshold reduces to £30,000 and, as announced today in the Spring Statement, this threshold will reduce to £20,000 from April 2028. 

The Government believe by reducing the gross income threshold further to £20,000 will ensure that a further 900,000 sole traders and landlords will fall within the MTD regime. 

Are there any taxpayers specifically exempt from MTD? 

Certain groups of taxpayers will be exempt and will not require to use MTD for income tax, these being: 

• Power of Attorneys 
• Non-UK resident foreign entertainers and sportspeople who have no other income sources that count towards qualifying income for MTD; and 
• Taxpayers who HMRC cannot provide a digital service to 

Certain other groups are deferred from MTD, during the course of this Parliament, and include: 

• Ministers of religion 
• Lloyd’s Underwriters 
• Recipients of Married Couples Allowance; and 
• Recipients of Blind Person’s Allowance 

What happens if there are other sources of income that need declaring? 

Any additional sources of income will need to be reported at the year-end alongside any adjustments to business or rental income and expenses. 

How are quarterly reports and tax returns filed under MTD? 

HMRC will require taxpayers to file their quarterly reports via specific software and will now require the year-end tax return to be filed under the same format. This is a change in process as before HMRC were allowing the tax returns to be filed using HMRC’s online services. 

What should I be doing now to prepare for MTD? 

Within Affinia we are currently contacting our clients that are impacted by MTD from April next year and will be providing advice and guidance to ensure a smooth transition over the coming months. 

Read the full Spring Statement Guide

While there were no new policy announcements in today’s Spring Statement, we revisit the important changes from the 2024 Budget, covering Employment Taxes and a summary of the key consultations including advanced clearances, reform of behavioural penalties and a comprehensive package of measures to close in on promoters of marketed tax avoidance schemes. Read more here.