HMRC’s improved engagement with Making Tax Digital for Income Tax (MTD IT) has been commended by the UK’s Administrative Burdens Advisory Board (ABAB) in its 2024 annual report – although it also expressed ongoing concerns.
The report reflects on the progress of MTD IT from December 2023 to November 2024, acknowledging improvements since ABAB’s 2022 report, which initially outlined several concerns with the system.
The ABAB maintains reservations regarding the accuracy of in-year tax calculations, particularly when taxpayers have non-MTD income sources or are due reliefs.
The HMRC acknowledged these concerns and plans to issue clear warnings alongside such calculations.
The board also emphasised the importance of expanding the MTD IT testing programme, describing it as ‘mission-critical’.
This follows the government’s Autumn Budget 2024 announcement to lower the mandation income limit to £20,000 by the end of the current parliament.
The ABAB advocates for a ‘cautious approach’, suggesting that MTD IT should not be extended until the benefits of its first two phases are proven.
The ABAB’s 2024 survey indicated low awareness of MTD IT among businesses, with many respondents anticipating increased costs due to its implementation.
The board stresses the need for greater awareness and addressing these business concerns.
Furthermore, the ABAB has engaged with HMRC regarding the proposal to report employee hours in payroll submissions, which has been postponed to April 2026.
Finally, ABAB has reservations about the necessity of the data for tax administration and has urged the HMRC to disclose its legal advice on this matter.
Additionally, the board suggests considering a delay to the ‘problematic’ April 2026 start date for mandatory payrolling of benefits in kind.
