Making Tax Digital (MTD) for income tax is being extended to sole trades and landlords with qualifying income of more than £20,000 from April 2028. The Government also announced further changes to MTD as set out in the technical note “Modernising the tax system through Making Tax Digital”, details of which are provided below. The Institute has been engaging extensively with HMRC, together with the other professional bodies, to raise the impact of this major change to income tax reporting on individuals and their agents and the challenges that this will present.  There is now just over a year to the first tranche of mandation of MTD for income tax which will commence from April 2026 for those with gross income of over £50,000 and from April 2027 for those with gross income over £30,000. Even more worryingly, the government has also said that it will continue to explore ‘how it can best bring the benefits of digitalisation to more of the around four million taxpayers who have income below the £20,000 threshold’.  We will be discussing the MTD for income tax Spring Statement measures and announcements with HMRC via various stakeholder forum meetings in the coming weeks and months. Despite our reservations about MTD, the Institute will continue to work with HMRC on MTD readiness and is developing a cross-department MTD strategy to assist members in their preparations. We will also continue to represent members views as we approach April 2026 and will be conducting a short survey on MTD for income tax in next week’s Tax News.  End-of-year tax reporting for MTD   Some users of MTD for income tax will have other sources of income that need to be reported in Self-Assessment (SA). These additional income sources must be reported at the end of the tax year, alongside any necessary adjustments to their business income and expenses.   Previously, users would have been able to use HMRC’s online filing service to submit their final tax return. HMRC has now announced that its online filing service will not be available to do so and that MTD taxpayers must file their tax return through their MTD software. The government will adopt this change and introduce legislation ahead of April 2026.   One or more MTD-compatible software products will therefore be needed to meet SA filing obligations which makes the choice of software used by the agent/taxpayer of extreme importance.   Exempting/deferring certain groups from MTD  The government believes that some taxpayer groups will face disproportionate barriers to operating MTD and should be exempt. The following groups will therefore not be required to use MTD for income tax, (subject to notifying and satisfying HMRC that they are exempt):   taxpayers who have a power of attorney, ·non-UK tax resident foreign entertainers/sportspeople who have no other income sources that count as qualifying income for MTD, and taxpayers for whom HMRC cannot provide a digital service. The following groups will also not be required to join MTD for income tax over the course of this Parliament:   ministers of religion, Lloyd’s Underwriters, recipients of the married couples’ allowance, and recipients of the blind persons’ allowance. Additionally, individuals will not be required to use MTD until April 2027 if they have information that they would need to submit using the SA109 schedule. HMRC will work with stakeholders to finalise the design of a one-year deferral for these groups to allow time to incorporate into MTD the government’s changes to the taxation of non-UK domiciled individuals.   Legislation will therefore be introduced to defer/exempt these groups and the criteria for deferrals/exemptions will be set out in guidance once the legislation is finalised.   Finalising the policy framework for MTD and penalty reform  The government has announced several further changes to the design of MTD and penalty reform. These include:  changes to enable taxpayers with an accounting date of 31 March to start their MTD obligations on 1 April in the first year of operating MTD which will avoid the need for burdensome manual adjustments at the end of the tax year, and a power for HMRC to cancel/reset late submission penalty points and to cancel associated financial penalties; this enables HMRC to cancel penalty points, for instance, in periods prior to insolvency, so that penalty reform reflects HMRC’s general approach to insolvent taxpayers. HMRC will continue to engage stakeholders on these changes before legislation is introduced ahead of April 2026. 

Within the Spring Statement Green Book were a range of miscellaneous measures worthy of mention including news of a new online service for reporting and paying the high income child benefit charge, the launch of a consultation on advance tax certainty for major projects and a consultation on research and development (R&D) advance clearances.   High income child benefit charge (HICBC)   From summer 2025, employees liable to the HICBC will be able to report their family’s child benefit payments to HMRC via a new digital service and they will also be able to opt to pay the HICBC directly through PAYE, without the need to register for self-assessment (SA) and file SA returns.  Advance tax certainty for major projects consultation   At Autumn Budget 2024, the government announced in its Corporate Tax Roadmap that it would be consulting on a new process to provide increased tax certainty in advance for major projects. A consultation has therefore now been launched seeking views on taxpayers’ priorities which also sets out thinking on how a new process could work to support investment decisions. Responses should be sent to advancetaxcertainty@hmtreasury.gov.uk or advancetaxcertainty@hmrc.gov.uk by 17 June 2025.  As part of this, businesses will also be able to obtain certainty on the transfer pricing treatment of cost contribution arrangements through the UK’s existing advance pricing agreement programme.  R&D reliefs advance clearances consultation   The government has also published a consultation on widening the use of advance clearances in R&D tax credits. The aim of the consultation is to explore options to reduce error and fraud, provide certainty to businesses and improve the taxpayer experience. Views are sought on whether a system of advanced clearances would deliver these aims and the best way to design and operate such a system. This consultation closes on 26 May 2025 with responses to be sent to randd.advance.clearances.consultation@hmrc.gov.uk.   

The European Commission has welcomed the European Court of Auditors' special report on VAT fraud on imports. The report emphasises the importance of addressing VAT fraud, with particular regard to simplifying import customs procedures. The Commission aims to better protect the EU's financial interests and ensure a fair and competitive business environment by strengthening the EU's tax legislative framework and improve cooperation between tax and customs authorities with measures such as VAT in the Digital Age (ViDA) and the Import One Stop Shop (IOSS).

The FISC subcommittee will host a public hearing on Thursday 24 April 2025 to discuss the role of tax in aligning the green transition and competitiveness.

As we reported earlier in the month, from 31 March 2025, HMRC launched its new email enquiry service for agents to help escalate and resolve individual (and not employer) PAYE and self-assessment queries which are over four weeks old. More details of how the new service should work are set out in an email to agents. For several years, the Institute has been advocating for HMRC to establish an email enquiry service for agents including in last year’s Pre-Budget submission and in a letter at the end of 2024 to HMRC on services. The Institute participates in the new HMRC Stakeholder Forum, the Customer Services for Tax Agents and Representative Bodies Working Group, which aims to assess current agent services and to develop improved services for agents contacting HMRC with client queries. This new email enquiry service is an output from that forum which will continue its work including reviewing the workings of the new service.   

Last week, the United Nations Committee of Experts on International Cooperation in Tax Matters met to further progress the implementation of its 2021-2025 work plan. The Committee, comprising 25 members representing diverse tax systems and geographical regions, considered emerging tax risks in areas such as the digitalised economy and crypto assets and also discussed tax treaty negotiation and increasing tax transparency.

In Irish news this week, we issue a further reminder that the deadline for submitting the 2024 share related returns is 31 March 2025 and we outline the EU VAT scheme available to small enterprises. In UK news, HMRC has begun a communication campaign on Making Tax Digital and the Autumn Finance Bill has now completed all parliamentary stages. In International news, the OECD has published the 2024 update of its Investment Tax Incentives Database. Ireland 1. We remind readers of the imminent deadline for filing the annual share scheme returns for 2024. 2. Read about the EU VAT SME scheme available to small businesses to alleviate VAT compliance obligations. UK 3. HMRC is writing to agents and clients on Making Tax Digital. 4. The Autumn Finance Bill recently received Royal Assent and is now Finance Act 2025. International 5. Read about the latest update of the OECD Investment Tax Incentives Database. Keep up to date with all the latest Irish, UK, and international tax developments through Chartered Accountants Ireland’s Tax Newsletter. Subscribe to the Tax News by updating your preferences in MyAccount. You can also read this week’s post EU exit corner which confirms that the next stage in the Windsor Framework for parcels and freight has been further delayed and will now commence on the revised date of 1 May 2025.

Last week, all the remaining stages of the Finance Bill took place in the House of Lords on 19 March 2025. Although there was a debate, these stages were a formality only as the Lords cannot make changes to a Finance Bill. The Bill subsequently received Royal Assent on 20 March and is now Finance Act 2025. The Act reflects many of tax changes which are due to take effect from the start of the new tax year next week on 6 April 2025 or the beginning of the new Financial Year 2025 from 1 April 2025. We will be reminding readers of the key changes taking effect in next week’s Chartered Accountants Tax News. We previously reported on the National Insurance Contributions (Secondary Class 1 Contributions) Bill, which will implement the changes to employer national insurance contributions announced in the 2024 Autumn Budget. The Bill was returned to the House of Commons to consider proposed amendments. It is expected that consideration of these amendments will take place today, Monday 24 March 2025.  

Revenue has recently updated three other Tax and Duty Manuals. The updated manuals relate to PAYE services, income tax processing for assignees, and investment in renewable energy generation relief. Details are set out below. The guidance on Income Tax Processing for Temporary Assignees has been updated to include links and information on the eSARP portal. The PAYE services manual Online Unemployment Repayments has been updated to reflect changes made on the PAYE services section in myAccount and other services section in ROS.  References in the manual to specific years have been replaced with the words “current year” or “previous four years”. For example, “Manage your Tax 2025” changed to “Manage your Tax for the current year”. The manual on Relief for investment in renewable energy generation is no longer relevant as this investment scheme ceased on 31 December 2014.

Capital Acquisitions Tax – Part 15 – Insurance Policies provides guidance on the Capital Acquisitions Tax (CAT) exemption for proceeds from insurance policies designated to pay CAT. Revenue has updated the manual to include a new example and to remove references to earlier statements of practice as the relevant material is included in the manual.

Revenue has updated its guidance on Road Haulier Drivers (Employee) – Subsistence Rates to reflect the increase in subsistence rates effective from 29 January 2025. The historical subsistence rates for periods prior to 30 June 2019 have been removed but are still available in archived versions of the manual.

The Chancellor of the Exchequer Rachel Reeves will deliver the Spring Statement later this week on Wednesday 26 March. It is expected that her speech will be delivered after Prime Minister’s questions at around 12.30pm. Speculation has been rife recently that the Chancellor may be forced to abandon the Government’s stated policy of only announcing tax changes at one fiscal event per year in the Autumn. In recent days the Chancellor has ruled out further tax rises, but not other minor tax changes. We will be reporting on the Spring Statement in full in next Monday’s edition of Chartered Accountants Tax News. The Institute for Fiscal Studies has published two useful articles on the upcoming Spring Statement: https://ifs.org.uk/articles/todays-ons-figures-reinforce-challenges-next-weeks-spring-statement, and https://ifs.org.uk/articles/chancellor-cannot-hide-ever-her-big-political-choice. The House of Commons Library has also published a background briefing. The current expectation is therefore that the Spring Statement will mainly be an economic update coupled with the announcement of spending cuts hence any tax changes are expected to be minor, with the Chancellor delaying any significant tax announcements to the autumn. However, at a time of significant geopolitical disruption, the Spring Statement remains important and may give hints as to what we can expect from the Summer 2025 spending review and the Autumn Budget. Tax and other consultations are expected to be launched in conjunction with the Spring Statement, including some on the Corporate Tax Roadmap. This was confirmed by the Exchequer Secretary to the Treasury who announced in a recent conference speech on 11 March that the following consultations will open in Spring 2025: Closing in on promoters of marketed tax avoidance, A consultation on how businesses can be better supported when seeking to deliver major projects in the UK, Use of advance clearances in Research and Development tax reliefs, and Enhancing HMRC’s powers to deal with tax advisers who facilitate non-compliance. Use HMRC’s check the status of tax policy consultations page to keep abreast of consultations. As more consultations open in the coming weeks, these will appear on this page. HMRC has stated that there will be a larger than normal number of consultations being opened with overlapping periods and it recognises that this will have an impact on the ability of stakeholders to respond.