HMRC anticipates 42% of taxpayers, around 2,916,000, will need to comply with Making Tax Digital for income tax out of 7,020,000 taxpayers with self-employment or property income within income tax self assessment for 2023/24. ICAEW Tax Faculty analyzes HMRC’s latest figures on MTD implications for taxpayers, agents, and HMRC.

HMRC updates estimates for MTD compliance based on 2023/24 tax year ITSA returns until March 31, 2025. Taxpayers will transition from basis periods to tax year basis, potentially impacting trade income. The final number of taxpayers subject to MTD hinges on available information for the relevant tax year.

Compliance with MTD requires software use for accounting records maintenance, quarterly updates, and end-of-year tax return submission to HMRC. Mandated for those with total gross income over £20,000, implementation timelines vary: April 2026 for £50,000+, April 2027 for £30,000+, and April 2028 for £20,000+ earners.

HMRC expects 2,353,000 self-employed individuals and 313,000 self-employed property earners to comply with MTD for income tax. Of 563,000 landlords within scope, 47% projected to join in April 2028. Majority of in-scope taxpayers have agent representation, with 35% unrepresented.

Challenges lie in informing taxpayers about MTD changes and aiding transition to software record-keeping. Urgency surrounds 217,000 unrepresented taxpayers needing MTD compliance from April 2026. Agents face obstacles as 28% of represented taxpayers did not use software for 2023/24 ITSA returns.

Approximately 9,110,540 taxpayers (76%) won’t require MTD adoption, including 4,103,000 with self-employment or property income. Focus on MTD should not overshadow needs of these taxpayers. HMRC reported 12,026,540 tax returns for 2023/24 tax year, emphasizing the importance of addressing all taxpayer segments during MTD implementation.

Read more at Yahoo Finance: HMRC expects 42% of taxpayers to comply with MTD for income tax