Policy paper

Making Tax Digital for Income Tax and penalty reform

These measures introduce the draft legislation for Making Tax Digital for Income Tax and penalty reform.

• From: HM Revenue & Customs
• Published: 21 July 2025

Documents

Draft legislation — Making Tax Digital and penalty reform

PDF, 237 KB, 7 pages

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Draft legislation — Making Tax Digital and penalty reform (accessible version)

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Draft Income Tax (Digital Obligations) Regulations 2026

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Explanatory note

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Details

These measures refine and simplify the Making Tax Digital (MTD) for Income Tax and penalty reform regimes.

Certain groups — such as ministers of religion, Lloyd’s underwriters, and recipients of Blind Person’s Allowance — will be deferred from MTD until at least April 2029. Others, including individuals with power of attorney and non-UK resident entertainers with no other qualifying income, will be permanently exempt.

These measures also introduce technical and policy amendments to ensure effective implementation of MTD and penalty reform, including the authority to cancel or reset late submission penalty points and cancel associated financial penalties.

Additionally, MTD users will be required to submit their end of year tax return using MTD-compatible software and the qualifying income threshold to join MTD will be reduced to £20,000 from tax year 2026 to 2027 onwards.

To provide comments, please email makingtaxdigitalconsultations@hmrc.gov.uk by 16 September 2025.

Published 21 July 2025