The government has published draft legislation for Making Tax Digital for Income Tax and Penalty Reform, alongside other documents in preparation for the Finance Bill 2025/26.

The draft measures which you can find at Making Tax Digital for Income Tax and penalty  reform, include draft Finance Bill clauses and draft Income Tax (Digital Obligations) Regulations 2026.

This draft legislation refines and simplifies the existing framework and introduces changes that the government announced at the Spring Statement in March this year. They include:

• a deferral from MTD until at least 2029 for some groups, such as Ministers of Religion, Lloyds Underwriters, and recipients of the Blind Person’s Allowance
• exemptions from MTD for others, including individuals with Power of Attorney and non-UK resident entertainers with no other qualifying income
• technical and policy amendments to ensure effective implementation of MTD and penalty reform, including the authority for HMRC to cancel or reset late submission penalty points and cancel associated financial penalties
• a requirement for MTD users to submit their end of year tax return using MTD-compatible software
• a new qualifying income threshold for MTD for Income Tax of £20,000 to be applied from 2028/29 onwards.

As also mentioned at the Spring Statement, individuals will not be required to use MTD until April 2027 if they have information that they would need to submit using the SA109 supplementary pages. The government is continuing to work with stakeholders to finalise this deferral which will be included in legislation later this year.

Members wishing to comment on the proposed legislation should send their feedback to UKPolicy@accaglobal.com.