The new regulations mandate that individuals with £50,000 of gross annual trading and/or rental income sign up for the Making Tax Digital initiative for income tax, which took effect on April 6, 2024, unless they fall into an exempt group. According to multiple reports, some taxpayers with this income level will be exempted automatically, though the specific criteria determining exemption remain unclear. Those who are eligible must file updates four times a year in addition to their annual tax return and use approved software to submit them, but the available software options have not been detailed. The number of Britons estimated to be affected by these rules for the 2024/25 tax year is also unknown.
For the 2026 to 2027 tax year, there are no penalties for missing a quarterly update deadline, a grace period implemented by HMRC as people adapt to the new system. However, fines will be issued for not keeping records at all, and existing penalties for late filing of tax returns or payment still apply. The exact penalties for not keeping records and how they compare to existing ones have not been specified.
Spring is a time of fresh starts, and for taxpayers it also marks the arrival of a new tax year and new tax rules.
This marks stage one of the three-phase Making Tax Digital for Income Tax programme that HMRC is bringing into effect across the next three tax years, according to the Chartered Institution of Taxation. HMRC first introduced its Making Tax Digital scheme for VAT-registered businesses in 2022 as part of a phased transition to an all-digital service. Ellen Milner, CIOT's Director of Public Policy, noted in an official statement that spring is a time of fresh starts, and for taxpayers it also marks the arrival of a new tax year and new tax rules.
In future years, 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. 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.
The most contentious change being made this April is bringing business and agricultural assets into the scope of inheritance tax, albeit with an additional allowance and being taxed at a lower rate.
Separately, inheritance tax changes are also taking effect in April 2024. According to Ellen Milner, the most contentious change is bringing business and agricultural assets into the scope of inheritance tax, albeit with an additional allowance and being taxed at a lower rate. She added that this will mean many more valuations of estates will be required, and farmers and business owners potentially in scope will need to pay careful attention to their tax planning. The details of the additional allowance and lower tax rate have not been disclosed.
This will mean many more valuations of estates will be required. Farmers and business owners potentially in scope will need to pay careful attention to their tax planning.