HMRC first announced plans for Making Tax Digital, a huge overhaul of the tax compliance system, in 2015. I was invited to an early consultation with HMRC where I and other tax professionals discussed HMRC’s idea to require all self-employed taxpayers to send information every quarter. I wasn’t keen then and I’m still not keen. Mainly because I have never understood that MTD was proportionate, or the best way to help taxpayers return accurate information for their tax to be calculated.

Over a decade later, the new system becomes compulsory for the first time in 2026. This affects some taxpayers with self-employed and/or rental income. Despite the long build up, with many delays along the way, final construction of HMRC’s own software systems has gone right up to the wire and there is still MTD legislation being introduced this April for the coming tax year. And firms developing software for taxpayers’ purchase and use (there is no free software provided directly by HMRC) have similarly been racing to get products ready. There has been some excellent cooperation between HMRC, professional bodies, software houses and tax professionals to pull everything together and try to anticipate glitches, and to get the right information out to taxpayers affected.

As an adviser, one of the big challenges has been considering what software to use. And knowing that I am not in a position to advise clients who want to choose what to use themselves. Because I work so much with spreadsheets, and have found these work well for most clients’ VAT returns, I shall be sticking with spreadsheets for the most part for MTD.

Many of my clients are likely to want to do their own ‘quarterly updates’ and then get assistance with the final submission (a summary of all four quarters together with all other tax-return information like salary, pension, investment income, student loan). This is good news because there will not be time to serve all my clients if every one starts needing multiple submissions each year.

Considering MTD has been referred to as the ‘death of the tax return’ because the current tax-return form will cease to be used by taxpayers in MTD, there will be more submissions of information than ever to HMRC from those in MTD. Self-employed sole traders who are also VAT registered and who have rental income will have thirteen submissions a year to make to HMRC, once their income reaches the threshold to have to join MTD.

Anyone can check here whether they need to enter MTD in 2026, based on income in the 2024/25 return Why do you need to send a Self Assessment tax return? – Guidance – GOV.UK and there is more information on my Making Tax Digital page.

Ready or not…

This Budget, with fevered speculation, leaks, rumours, and pre-announcements, has had a bigger build up than a blockbuster film.

In what was never going to be an easy Budget given the state of the UK economy, many tax commentators favoured a rise in income tax. A clear breach of the manifesto commitment not to raise certain tax rates, but honest, clear, minimal drafting of new legislation required, and straightforward for employers and others to plan for and implement next April.

Rather than do this, it was already pre-announced that there would instead be a large number of smaller changes. (One of the later pre-announcements. I could hardly keep pace, right up to the accidental release of the key Budget document by the Office for Budgetary Responsibility minutes before the Chancellor’s speech – the equivalent of a film’s screenplay appearing online before anyone has arrived on the red carpet.)

This slew of smaller measures has come to be described as a ‘smorgasbord’ approach to the Budget.

Here are some of the main points announced for tax:

• Income tax and national insurance thresholds are frozen until 2031. For decades in the past, these thresholds would gradually increase, more or less, with inflation. This continued freeze, means that many people will pay more income tax (‘fiscal drag’).
• The two-child benefit limit will be abolished in April 2026. But no change to the income level above which child benefit begins to be taxed away.
• The yearly cash ISA contribution limit for under 65s will be reduced to from £20,000 per year to £12,000 per year in April 2026. No change to the threshold for stocks and shares ISAs.
• From April 2026, the income tax rates for dividend income in the basic and higher-rate tax bands will increase by 2%. The nil rate for dividends, whereby the first £500 of dividends received per tax year escapes tax, remains the same.
• Fuel duty is frozen until September 2026.
• From April 2027, the income tax rates for savings income will increase by 2%. The allowance for savings, whereby the first £500 to £1,000 of savings income received per tax year escapes tax, remains the same.
• From April 2027, the income tax rates for property income will increase by 2%. The allowance of £1,000, and the rent-a-room relief of £7,500 for income from a lodger, remain the same. Although as with the other allowances, the fat that these allowances are not increasing creates fiscal drag.
• Pension salary sacrifice will be capped at £2,000 pa from April 2026.
• From April 2028, electric vehicles will suffer a 3p per mile charge.
• From April 2028, an annual ‘mansion tax’ or high-value council tax surcharge will apply to homes worth more than £2 million.
• From 6 April 2029, there are plans for ‘requiring income tax Self Assessment taxpayers with Pay as You Earn (PAYE) income to pay more of their Self Assessment liabilities in-year via PAYE… The government will publish a consultation in early 2026 on delivering this change, and on timelier tax payment for those with only Self Assessment income’. This is in the Tax debt Strategy Update. It seems to be hinting at changes to tax payment dates for the self employed. Although of course, many are already required to make payments on account, with up to 100% of their tax paid within four months of the close of the tax year.

It is some years since I partook of a Scandinavian smorgasbord. But I clearly remember it involving people being treated to some food, rather than having to empty our wallets onto the table. By and large, Scandinavian countries levy more progressive tax, with those in a stronger financial position more clearly paying proportionately more. Their tax legislation is less complicated and easier to understand than the UK’s, and less voluminous. In fact everyone else has shorter tax legislation than the UK – ours is the longest in the world. This is not a badge of honour, rather the product of successive small tweaks and knee-jerk changes over decades, with no Chancellor brave enough to make significant simplification.

Unappetising in many ways.

Very little about tax in today’s Spring Statement. Much of the Statement focused on targets already set being met amid global uncertainties, including maintaining ‘fiscal headroom’.

The main tax news for self-employed taxpayers is administrative. The Making Tax Digital changes, delayed many times, are moving forward starting in April 2026, and bringing in more taxpayers. By April 2028 on the current schedule, everyone self employed (or letting a rental property) with income over £20,000 per year will need to make five submissions per year to HMRC. The extra time and software needed (HMRC is not at this time offering a free online tool for submission as it currently does) is bound to come at a cost, which will hit smaller businesses disproportionately. One of the difficulties for tax advisers is that many of the software processes are not yet clear, and many of the promised software products not yet available.

There was already a commitment not to raise taxes further. The rise in employer National Insurance, included in the Autumn Budget, takes effect this April.

Plans for swingeing cuts to Civil Service spending were announced in recent weeks, as well as further and faster cuts in subsidies previously available to farmers. Coming out of today’s Statement, although Universal Credit will rise, various welfare reductions will run alongside measures to get more people into work. Personal Independence Payments will also be reviewed. With rising inflation and costs of living, it remains to be seen whether cuts, rather than support, will provide the incentive envisaged.

Few people will have envied the new Chancellor’s task in setting today’s Budget.

The stated aim was to support ‘working people’. To an extent, the plans outlined do that. Promises not to raise the rates of income tax, self-employed or employee national insurance and VAT have been kept. However the tax-free personal allowance remains frozen until April 2028, which does raise the effective rate of tax paid by individuals over time, even though the tax rates themselves are staying put. (Hitting lower-income taxpayers proportionately harder than those on the highest incomes.) And new national insurance and minimum-wage rates paid by employers will indirectly affect individual workers to an extent, as employers may need to tighten their belts, possibly taking on fewer employees in response. There will also be impacts on consumers, if employer businesses increase prices of their products.

A few ‘crowd pleasers’ for devotees of draught beer, and drivers with gas-guzzler cars. And a slight weighting of certain taxes towards multiple property owners and users of private jets.

Some of the £40bn extra revenue to be raised, which is needed for the very considerable spending outlined, will come from capital taxes. Capital gains tax rates rise, and some inheritance tax reliefs will freeze or decrease in future. And there will be a withdrawal of tax reliefs currently available to non-domiciled UK taxpayers. Capital taxes and those paid by people who are internationally mobile offer more opportunities for (legitimate) tax planning than some other taxes: for example, people may change their decisions about selling assets, rewrite their Wills, or replan a move to or from the UK.

So it will be interesting to see whether the amount raised provides fully for the much-needed big spend, including on health and infrastructure.

The March Budget featured a cut in the main rates of national insurance. This drops in April 2024 to 6% for the self employed, and to 8% for employees.

This is a quick way to be seen to boost after-tax income for earners. However, most other rates and allowances are static. In particular, the tax-free personal allowance is frozen, and the basic rate band remains the same. The tax-free thresholds for lower-income trades and for savings have not moved, and the allowance for tax-free dividend income is halved. At a time when we have been experiencing high inflation, this ‘fiscal drag’ catches more taxpayers into higher rates of tax, and means that some who have not previously needed to submit tax returns will need to start to do so, without their financial circumstances having changed.

The VAT registration threshold goes up £5,000 to £90,000. This is welcome, but long overdue as it has not risen since 2017, and was due to be reviewed in 2022.

The move to abolish Class 2 National Insurance is a welcome simplification. This has taken some years to work through, and has caused a good deal of administrative hassle to HMRC, taxpayers and advisers along the way.

Year-end planning suggestions include the following:

• Consider pension top ups or charitable donations before 6 April, so that these fit into the 5 April 2024 tax return. For taxpayers whose top rate of tax is 40%+, these can save tax during 2025.
• For families with children, the changes to child benefit rules mean that less of this will be taxed away. Child benefit applies for households with a child up to 20 years old, if they are still in education. You can check here whether you are eligible.
• The start of April is the time to begin gathering records for the next tax return. Most banks offer options to download statements in pdf or spreadsheet (Excel or .csv) format. I suggest doing a whole-year download and keeping both. A .csv version can be a useful starting point for checking transactions for the tax return. There is no need to download month by month: A download from 1 April 2024 through to 5 April 2024 should cover all relevant transactions.

HMRC’s Making Tax Digital project for income tax returns stretches further into the future. The two key suggestion to be reasonably prepared are:

• Ensure you have a personal tax account and can log in. HMRC will use these increasingly and there is certain information tax advisers are not able to access, which taxpayers can see by using their HMRC login.
• Keep self-employment records on a spreadsheet, or in a software program which records each transaction individually (and which can be downloaded or exported, to work on for the tax return).

HMRC staff scheduled strike action for today. Not the most auspicious backdrop to today’s Budget.

Jeremy Hunt has been Chancellor for five months now. It feels longer than five months, maybe because the UK has been getting through its Chancellors quicker than a disappointed customer at an evening’s speed dating.

Looming large for many of my clients is the impact of the recent cuts in funding to the arts. These have been badged as a levelling up, however together with the reduction of funding for arts subjects in Higher Education, they are devastating for many individuals, and a heavy blow for creative and performing arts in and around London in particular.

Key income tax rates and allowances can be seen here. Much was made of the welcome but limited measures to help lose on benefits and lower incomes, families with childcare costs, and of plans to curb inflation which potentially will help anyone struggling with increased costs of living. The lifting of certain limits on pension contributions is largely a response to senior health workers choosing to retire early rather than stay in work, after previous changes to the rules on taxation of pension contributions backfired. Preannounced but not mentioned are static or decreasing tax thresholds. On top of high inflation, this means that more people will pay more tax next year.

End of tax year planning and actions

Make sure you are signed up to HMRC online services with Gateway access and a ‘Tax Account’ here if you aren’t already. (Or retrieve your login details if you need to!) This is becoming essential as more and more tax information and organisation is done online.

For any clients whose 2023 payments on account we reduced, check whether the estimates we used still seem realistic, depending on how recent months have gone. If income has been better than expected, that’s great, but if the payments on account were reduced, it is worth checking whether in hindsight, these should be readjusted.

The capital gains tax tax-free allowance is reducing to £6,000 this April, then to £3,000 in April 2024. Anyone with sales at a gain coming up (such as investment properties, or valuable instruments which have gone up in value), to get the current, higher allowance, the sale needs to be done (or at least unconditional contracts exchanged) by 5 April this year.

Anyone unsure whether they have a complete record of national insurance payments since 2006, do check your NIC record online or by phoning 0300 200 3500. It is possible in some cases to make additional, voluntary contributions if you wish until July of this year. Details are here.

For clients with 31 March or 5 April accounting dates, consider spending on tax-deductible items you are planning to buy in the next few months during March, to get the benefit of these in the next tax return.

For taxpayers who pay tax at 40%, consider making an extra payment into your personal pension or your chosen charities to arrive by 5 April, to save tax in the 2023 tax return. For clients who are not usually higher-rate taxpayers but have had increased income recently, we can run a quick estimated calculation to help you think about making pension or charity payments (and for pension payments, to make sure you stay within the current limits for tax relief).