HMRC has released 'Research Report 646: Customer readiness for Making Tax Digital for Income Tax Self-Assessment (ITSA)'. The research found that whilst four in ten taxpayers surveyed recognised the benefits of the new rules, and thought complying would be easy, six in ten were either not engaged in the process or had concerns.

Making Tax Digital (MTD) for Income Tax is due to be introduced for the self-employed and landlords with turnover or gross income over £10,000 from April 2024.

The survey randomly contacted over 2,000 eligible Income Tax Self Assessment (ITSA) customers in 2021 to determine their readiness to move to MTD.

  • 25% of those surveyed were classed as ‘capable but disengaged’ whilst 15% were described as’ cautious but lacking confidence’ and 18% ‘resistant and less capable’, meaning that in total six out ten had concerns and may be resistant to the change.
  • 86% had turnover below the VAT threshold so had no experience of MTD, although 54% were already keeping records at least quarterly.
  • A small proportion of those surveyed (11%) said they would not comply with MTD if paying a fine was cheaper.
  • The primary concerns were finding choosing and using MTD-compatible software.
    • Ease of use of software and submitting quarterly returns was more of a concern for the over 55’s than the younger age groups with the majority expecting difficulties.
  • Customers also stressed a need for leniency over the first returns filed and HMRC engagement in helping them choose software.

With less than two years until the change is implemented HMRC may have hoped for a more positive response, however, they do still have time to engage with eligible taxpayers before the change becomes mandatory. It is unfortunate that the Pilot scheme launched in 2018-19 had so many restrictions on who could join, meaning that as of the start of 2022 only 1,015 people had participated in the scheme.

Useful guides on this topic

Making Tax Digital: Survival guide (for the self-employed & landlords)
This is a freeview 'At a glance' guide for the many self-employed taxpayers, company owners and property landlords who are unaware of HM Revenue and Custom's radical plans to transform the tax online filing system. 

MTD: Income Tax Pilot Tool
Making Tax Digital (MTD) for Income Tax. Are you eligible to take part in the MTD Pilot?

MTD: Toolkit for accountants
What is the current timetable for Making Tax Digital (MTD)? How will it work? Which clients will be excluded? What planning needs to be undertaken?  

Making Tax Digital: VAT (subscriber guide)
What is Making Tax Digital (MTD) for VAT? What is VAT 'functional compatible' software? What do you need to report their VAT? Are there penalties for making mistakes?  

External link

HM Revenue and Customs Research Report 646: Customer readiness for Making Tax Digital for Income Tax Self-Assessment (ITSA) 


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