The draft legislation for Making Tax Digital for Income Tax (MTD IT), published on 21 July 2025, formalises several policy measures, including the reduction of the MTD threshold to £20,000 effective from April 2028.
Assuming this draft legislation makes it into the Finance Bill and it achieves Royal Assent, from April 2025 we will have a mandated phased implementation, all depending on the level of annual qualifying income:
- from 06 April 2026 (where this is more than £50,000);
- From 06 April 2027 (where this is more than £30,000); and
- From 06 April 2028 (where this is more than £20,000)
Rather than update the existing MTD IT legislation, the draft rewrites Schedule A1 to TMA 1970 and confirms:
- Exemptions and deferrals for certain taxpayer groups until ‘at least April 2029’. These include ministers of religion, Lloyd’s underwriters and those in receipt of the Blind Person’s Allowance;
- Others, including individuals with power of attorney and non-UK resident entertainers with no other qualifying income, will be permanently exempt;
- For taxpayers who elect calendar quarters rather than align to tax year quarters, the applicable start date is 01 April rather than 06 April;
- HMRC’s penalty reform powers, i.e. a power cancel financial penalties and / or cancel / reset late submission penalty points
For Bookkeepers
ICB looks forward to the 2025 Summit when Craig Ogilvie from HMRC will, no doubt, outline what the draft legislation means for bookkeepers.
