UK Government responds to calls to stop income tax change

The UK Government has responded to an online petition urging for the planned changes to digitise tax from April 2026 to be abandoned. The e-petition, hosted on the UK Government's Petitions Parliament website, has garnered over 16,800 signatures.

Saira Khan, the creator of the petition, argues that many small businesses still utilise paper-based tax records and may not possess the necessary digital skills to transition fully online. However, in a written response to the proposals, the Treasury stated that Making Tax Digital "will help businesses stay on top of their affairs, boost productivity and ensure more of the right tax is paid".

The statement added that the UK Government will provide support to users with the new system and has "no plans to delay" its launch, reports the Daily Record.

The Treasury continued: "Making Tax Digital delivers value for money by increasing the amount of tax collected. This ensures that more money can go to funding vital public services, like the NHS, and supporting growth across the UK. Making Tax Digital for VAT has already been successful at reducing error and increasing tax revenues.

"HMRC's published evaluation shows Making Tax Digital generated additional VAT revenue, as forecast, in the range of £185 million to £195 million in 2019 to 2020. Making Tax Digital for Income Tax will build on this, and we expect it will result in an additional £1.95bn in tax cumulatively between its introduction and the 2029-30 financial year."

The Treasury added: "Making Tax Digital for Income Tax is a new approach that uses modern technology to help customers stay on top of their tax affairs and avoid errors. It will build on the successful introduction of Making Tax Digital for VAT which applies to over 2m VAT-registered businesses."

It continued: "The Government understands this is a big change for many taxpayers and agents, and it is committed to supporting them through the transition. It has worked with the software industry to ensure there is free and low-cost software available to support smaller and simpler businesses."

Once the 'Stop HMRC implementing making tax digital and enforcing quarterly submissions' petition reaches 100,000 signatures, it will be considered by the Petitions Committee for debate in Parliament. The full response from the Treasury can be viewed here.

Making tax digital

HMRC estimates that approximately 780,000 self-employed people and landlords will be required to use MTD for Income Tax from April 2026, with an additional 970,000 joining from April 2027.

Quarterly updates will distribute the workload more evenly throughout the year, bring the tax system closer to real-time reporting and assist businesses in managing their finances and avoiding the last-minute rush.

HMRC is encouraging eligible customers to sign up to a testing programme on GOV.UK and start preparing now. Agents can also register their clients via GOV.UK[dot].

Craig Ogilvie, HMRC's Director of Making Tax Digital, recently said: "Tax is changing and with just six months until Making Tax Digital for Income Tax comes into effect, now's the time to start preparing.

"MTD is about spreading your tax admin throughout the year instead of that January scramble to complete your Self Assessment return.

"There are free software options available, and early feedback from our testing participants shows the system is straightforward once you are familiar with it.

"Don't delay - go to https://makingtaxdigital.campaign.gov.uk/ to learn more and sign up to our testing programme today."

MTD for Income Tax represents the most substantial overhaul to the Self Assessment system since it was launched in 1997.

It will simplify matters for self-employed people and landlords to keep track of their tax affairs and help guarantee they pay the correct amount of tax.

From April 2026, people with qualifying income exceeding £50,000 will be required to maintain digital records, utilise MTD-compatible software and submit quarterly summaries of their income and expenses to HMRC.

These digital requirements will assist businesses in saving time through more streamlined record-keeping, minimise errors in tax calculations, and offer a clearer understanding of their tax obligations throughout the year. Qualifying income, which includes gross earnings from self-employment and property before any tax allowances or expenses are deducted, will be subject to new rules.

From April 2027, those with qualifying income above £30,000 will be required to use MTD for Income Tax. The threshold will then decrease to £20,000 from April 2028.

The gradual introduction of MTD for Income Tax comes after the successful implementation of MTD for VAT. This system now aids over two million businesses in reducing errors and saving time on their tax affairs.

Businesses that participated in the MTD for VAT testing phase were better equipped for the transition to quarterly reporting.

A 2021 independent report revealed that 69 per cent of mandated businesses experienced at least one benefit from MTD for VAT. Additionally, 67 per cent reported that it reduced the potential for mistakes in their record keeping.