Mixed scorecard for HMRC on making tax digital

In its annual report for 2024, the administrative burdens advisory board (ABAB) has praised HMRC for the quality of its engagement on making tax digital for income tax (MTD IT) and has set out areas where concerns remain.

ABAB offers constructive challenge and support to HMRC based on the feedback it receives from small businesses. Its latest annual report provides commentary on the progress made on its key priorities, including MTD IT, for the period from December 2023 to November 2024.
  
MTD IT
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In its 2022 annual report, ABAB set out its concerns with MTD IT (then referred to as MTD ITSA) and expressed its frustration that it was not being listened to by the government. ABAB believes that the situation has improved. In 2023, ABAB reported that its concerns were being acted on, and now in 2024 says that the quality of engagement with HMRC was “excellent”.   
 
However, ABAB still has several concerns with MTD IT, including:
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• The quality of in-year tax calculations. ABAB is concerned that tax calculations may not be accurate where the taxpayer has non-MTD income sources (eg, dividends) or is due a relief (eg, for pension contributions). ABAB believes that HMRC has taken this on board and is planning to issue clear ‘health warnings’ with the calculations. 
  
  
• The process for testing MTD IT (private beta). Although ABAB accepts that there are reasons why numbers in private beta are low, it believes that expanding the testing programme is “mission-critical” for the success of MTD IT.
  
  
• The further roll-out of MTD IT. At the Autumn Budget 2024, the government announced that it intends to lower the mandation income limit to £20,000 by the end of this parliament. ABAB recommends that a “cautious approach” is taken and that MTD IT is not extended further until the benefits of the first two phases (in April 2026 and April 2027) can be proved. 
  
  
• Awareness of MTD IT. ABAB’s annual survey for 2024 suggested that awareness of MTD IT was low and that a majority of respondents thought that it would increase business’ costs. ABAB says that more must be done to raise awareness and to address the concerns of businesses and agents.
  
  

Employment taxes ABAB has welcomed engagement with HMRC on the proposal to require employers to report employee hours in payroll submissions. The measure has been put back from April 2025 to April 2026, and some of ABAB’s concerns have been addressed. However, ABAB remains unconvinced that the data is required for administering the tax system and has called on HMRC to publish its legal advice.

ABAB has also called on the government to consider delaying the “problematic” April 2026 start date for mandatory payrolling of benefits in kind (BIK).