Britons will face £330 Financial Loss under Making Tax Digital Scheme – Applicable from April 2026

The UK government’s new rules for tax reporting, set to begin in 2026 under the Making Tax Digital (MTD) scheme, have been criticized as “pointless” by industry experts.

Despite the changes, taxpayers will face increased reporting burdens without any additional tax benefits, according to leading audit and business advisory firm Blick Rothenberg.

What Are the Changes with MTD?

Starting in April 2026, individuals and businesses with an income of £50,000 or more will be required to report their income and expenditure quarterly, rather than annually.

While the frequency of reporting will change, the actual tax liabilities and payment dates will remain the same, leading to questions about the effectiveness of the new system.

Fiona Fernie, a partner at Blick Rothenberg, expressed skepticism about the necessity of this change. She questioned, “What is the point of MTD if it doesn’t affect tax liabilities or payment dates?”

The Costs vs. Benefits of MTD

The government claims that MTD will provide a range of benefits, including helping businesses stay on top of their tax affairs and allowing them to access real-time financial data. However, Fiona Fernie argued that these benefits can already be achieved using free tools like spreadsheets or the Government Gateway.

The MTD system, on the other hand, will require businesses and individuals to purchase third-party software, adding additional costs that might not be justified.

Fernie further questioned claims made by HMRC that businesses using MTD are saving time, reducing errors, and feeling more confident about managing their taxes. She argued that there’s no clear evidence to suggest that MTD platforms are any more accurate than traditional methods like spreadsheets.

Data entry errors can happen just as easily on MTD platforms as they can on simpler systems.

The Impact on Small Businesses

The Institute of Chartered Accountants in England and Wales (ICAEW) has also voiced concerns over the impact of MTD on small businesses. They argued that quarterly updates will increase the administrative burden on small businesses, which may be disproportionate to the benefits.

Fiona Fernie pointed out that small businesses would be required to file additional returns without being provided with the necessary resources to do so unless they spend money on software or training.

This seems unfair, as it goes against the taxpayer’s charter, which promises services that are accessible, easy to use, and low-cost.

The costs for small businesses could be significant. Fernie mentioned that the cheapest software available costs £150 per year, and HMRC has estimated additional costs for training and transition at around £330. For small businesses or sole traders with lower incomes, these costs could pose a considerable financial burden.

Timeline of MTD Implementation

Under the new rules, the quarterly filing requirement will apply to individuals and businesses earning £50,000 or more by April 2025. The system will be extended to those with a gross income of £30,000 in April 2027, and finally, to those earning £20,000 by April 2028. The first quarterly filing for those affected will be due by 7 August 2026.

While HMRC’s Making Tax Digital system promises to streamline tax reporting and provide real-time financial insights, many experts, including Fiona Fernie of Blick Rothenberg, question whether these benefits justify the increased costs and administrative burden.

Small businesses, in particular, may face challenges, as they will be required to purchase software and training to comply with the new system. With the rollout set to begin in 2026, the effectiveness and fairness of MTD remain up for debate.

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