MTD progress report 

First, HMRC has announced that those who wish to be exempted from registration can now apply. Having previously reassured taxpayers that anyone exempted from MTD for VAT would automatically be exempt from MTD for income tax, HMRC has now decided that everyone has to apply (or reapply if they are already exempt from MTD for VAT).

Poor (or non-existent) internet may be a good reason for exemption but not as good a reason as inability to use computers, or non-ownership of a computer or smart device. However, since all the guidance on exemption is very vague and, in any case, available on the internet, this won’t help non-tech-users much. 

Fortunately, HMRC says that in November it will start sending letters to everyone who may be liable to register at the start date of April 2026 – that is, those whose turnover in 2024/25 exceeded £50,000 and who have made a tax return to that effect. Those who do not make a return until January 2026 will be filing online, which will undermine their case for exemption from MTD somewhat! Those who make income tax returns on paper should have done so by 31 October but late filers may also receive late letters telling them about MTD for income tax. So not much notice then. And we still don’t know what level of assistance the letters will offer to those likely to want to apply for exemption. 

The pilot 

• HMRC is trying hard but without much success to persuade tax agents to enrol their clients onto the MTD for income tax pilot scheme. There appear to be three main reasons why take-up is so low: 
  HMRC and successive government ministers have failed to make the case for MTD as a replacement for the current, already online, self-assessment filing system;
• agents and their clients have been bitten too often before by spending time and other resources on new initiatives that HMRC has postponed at the last minute;
• there seems to be some resentment at HMRC’s decision not to provide free software for taxpayers to use – the pilot is seen by some as free testing for the software companies that are going to benefit financially from MTD. '

Tax calculations 

An issue that is bubbling below the surface is HMRC’s insistence that it must provide the tax calculation under MTD for income tax. The process requires the taxpayer to submit figures and then accept HMRC’s calculation, or reject that calculation, in which case the taxpayer has not made a return and will have to amend the submitted figures in order to reach the expected tax position the taxpayer is happy to accept. 

Unfortunately, HMRC says that it will retain any figures submitted, not just the final set that is acceptable to both parties. It is feared that any discrepancies between successive sets of figures may become grist for HMRC’s mill. 

What will happen if HMRC produces wrong calculations is anyone’s guess.