HMRC to evaluate Making Tax Digital impact

The government says it will continue to evaluate Making Tax Digital for Income Tax as the scheme is extended to those with qualifying income over £30,000 from April next year.

Making Tax Digital for Income Tax became compulsory in April 2026 for landlords and sole traders with qualifying income of more than £50,000.

The threshold will fall to more than £30,000 from April 2027.

Additional costs of hundreds of pounds

In a written parliamentary question, Liberal Democrat MP Monica Harding asked: “What assessment has HMRC made of additional software and accountancy costs faced by sole traders and landlords who are required to use separate systems for Making Tax Digital for Income Tax and existing VAT reporting?”

In response, Labour MP James Murray pointed to the government’s MTD impact assessment, which estimates that those with qualifying income above £50,000 may incur an average one-off transitional cost of £285 and additional annual costs of £115.

Landlords and sole traders with qualifying income between £30,000 and £50,000 may face an average transitional cost of £350 and additional annual costs of £110.

Mr Murray added: “HMRC will evaluate the impacts of MTD for Income Tax as it is rolled out to those with income over £30,000 from April 2027 and for those with income over £20,000 in April 2028.”

Landlords lose six days to Making Tax Digital admin

The news comes as research from Tide suggests landlords could spend an average of six full days dealing with Making Tax Digital administration.

According to the data, nearly half of the qualifying sole traders and landlords (44%) expect Making Tax Digital admin to eat into their normal working hours, with more than one in three (36%) stating that this will be during time they would otherwise be serving paying clients and customers.

More than half (58%) expect it to take more than a working week, with more than one in 10 (13%) predicting that Making Tax Digital will require more than 10 full days of their time in year one alone.

When the working day runs out, personal time is also paying the price. The data reveals 38% expect to complete their Making Tax Digital admin in the evenings, 35% at weekends and 32% during planned time off or while on holiday.