Britons with a combined gross income of £50,000 or more from sole trades and property in the 2024/25 tax year are subject to new rules requiring them to file updates on their income and expenses online from April 6, 2024, according to HMRC guidance. People with £50,000 of gross annual trading and/or rental income were told to sign up to the initiative for income tax before it was introduced on April 6, 2024, unless they fall into an exempt group, as per official announcements. Eligible people in the £50,000 bracket now need to file updates four times a year in addition to their annual tax return, and use approved software to submit them, HMRC states.
While the switch to quarterly filings begins from April 6, 2024, HMRC says there are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year, a grace period put in place as people adapt to the new rules. Fines will be issued for not keeping records at all, and existing penalties for late filing of tax returns or payment still apply, according to HMRC.
Some taxpayers will be exempted automatically, while others won't, so it's important to check the official guidance, HMRC advises.
HMRC first introduced its Making Tax Digital (MTD) scheme for VAT-registered businesses in 2022 as part of a phased transition to an all-digital service. This marks stage one of the three-phase Making Tax Digital for Income Tax programme HMRC is bringing into effect across the next three tax years, as explained by The Chartered Institution of Taxation (CIOT).
Sole traders and landlords with qualifying income of £30,000 for the 2025 to 2026 tax year will need to start using the system from April 6, 2027, HMRC plans show. Those with £20,000 of qualifying income for the 2026 to 2027 tax year will need to switch to the new reporting rules from April 6, 2028, according to HMRC.
The most contentious change being made in April 2024 is bringing business and agricultural assets into the scope of inheritance tax, albeit with an additional allowance and being taxed at a lower rate, tax experts note. This will mean many more valuations of estates will be required, analysts say. Farmers and business owners potentially in scope will need to pay careful attention to their tax planning, according to financial advisors.