HMRC presses on with roll-out of Making Tax Digital for Income Tax (MTD IT) – but changes plans for Corporation Tax.
MTD IT is now well on the horizon, with updated draft legislation published over the summer. Significantly, HMRC also published a Transformation Roadmap, highlighting the fact that digital self-serve is very much the direction of travel. According to this document, ‘HMRC will look very different by 2030. Almost all our straightforward customer queries will be handled digitally or automatically with at least 90% of customer interactions being digital’.
New rules for sole traders and landlords
MTD IT is the new way for income and expenses to be reported to HMRC. Under these mandatory new rules, sole traders and landlords must send updates, filed online using specific software, to HMRC every three months.
The change is being rolled out in phases from 6 April 2026, depending on the level of what is called ‘qualifying income’. Entry to MTD IT is mandatory for sole traders and landlords:
• From 6 April 2026 if qualifying income is over £50,000 for the 2024/25 tax year.
• From 6 April 2027 if qualifying income is over £30,000 for the 2025/26 tax year.
• From 6 April 2028 if qualifying income is over £20,000 for the 2026/27 tax year.
And other taxpayers
The government has also said that it will ‘continue to explore how we can best bring the benefits of digitalisation to a greater proportion of the four million sole traders and landlords who have income below the £20,000 threshold’. This appears to leave the door open for future changes affecting those below the £20,000 threshold.
Inheritance Tax (IHT) net set to widen.
From 6 April 2026, changes announced last year will radically overhaul two key IHT reliefs: business property relief (BPR) and agricultural property relief (APR).
The real game changer is the significant restriction of 100% relief on qualifying agricultural and relevant business property in estates or settlements (trusts). Currently, relief is unlimited, but the new rules will introduce a £1 million allowance that effectively caps the relief available. The outworking will be that many more people will now need to fund an IHT liability in the future.
In outline:
The new £1 million allowance will apply to the combined value of business and agricultural assets in an estate qualifying for 100% BPR and/or 100% APR.
The £1 million allowance will also apply to the combined value of relievable agricultural and business property in trusts.
Any qualifying relievable property above £1 million will attract relief at a lower rate of 50%, and the £1 million allowance will rise with inflation from 6 April 2030.
What might this mean for you?
Advance planning will become key, to ensure maximum use is made of each individual limit. The changes will need consideration alongside other IHT rules, like those on lifetime gifting; and an assessment of how IHT interacts with other taxes. You should also consider how to pay any future tax liability on death. Some business owners may accelerate passing assets to the next generation or restructure business ownership and operations.
We appreciate that these decisions may involve a major reorientation in outlook, and could require especially sensitive handling. While last-minute adjustments are possible, these new rules are now expected, so plans should be made accordingly.
From 6 April 2027, further IHT changes will bring unused pension funds and death benefits into its scope. These changes may also require planning, especially for those with significant pension savings. Again, we can advise on the options that may be available.
Bespoke advice is always recommended, so please do contact us to discuss what these changes may mean for you.
Under new rules, more pensioners are now eligible for the Winter Fuel Payment in England, Wales, and Northern Ireland. In Scotland, eligibility has also widened for the Pension Age Winter Heating Payment.
Where taxable income is more than £35,000, however, HMRC will seek to recover any payment received. Recovery will be made by adjusting the 2026/27 tax code, or via the Income Tax self assessment tax return for 2025/26. For many people, these additional processes may be an unwelcome inconvenience.
As payments are usually made automatically to those eligible, you have to opt out of payment to avoid the payment and claw back process. Deadlines apply for the opt-out process but have now passed for this year in all parts of the UK. This unfortunately means that without a last-minute change from HMRC, anyone who has not already opted out will enter the winter 2025/26 payment and recovery cycle.
As regards the future, the first year you can now opt out of is 2026/27. If you live in England, Wales or Northern Ireland, you will be able to opt out for 2026/27 and subsequent years from 1 April 2026. If you live in Scotland, you can apply to opt out now, using an online form accessed via mygov.scot. This, however, will only impact payment from winter 2026/27 onwards.
HMRC presses on with roll-out of Making Tax Digital for Income Tax (MTD IT) – but changes plans for Corporation Tax.
MTD IT is now well on the horizon, with updated draft legislation published over the summer. Significantly, HMRC also published a Transformation Roadmap, underscoring the fact that digital self-serve is very much the direction of travel. According to this document, ‘HMRC will look very different by 2030. Almost all straightforward customer queries will be handled digitally or automatically. At least 90% of customer interactions expected to be digital’.
MTD and Corporation Tax
The surprise announcement over the summer was that plans to introduce MTD for Corporation Tax had been abandoned. But this doesn’t mean that there’s going to be no change for the Corporation Tax population. Though there’s no current Plan B for MTD for Corporation Tax, other comments in HMRC’s Transformation Roadmap suggest things will unlikely stand still.
The Roadmap says: ‘HMRC will modernise services for Corporation Tax, beginning with a renewal of internal systems for Corporation Tax to provide the foundation for future improvements . . . developing an approach to the future administration of Corporation Tax that is suited to the varying needs of the diverse Corporation Tax population.’
‘HMRC recognises that this population includes a wide range of entities and situations. From small businesses to multinationals, from charities and property management companies to unincorporated associations. HMRC will work with stakeholders to identify changes that provide the best outcomes . . . and is committed to consult and provide early clarity and assurance on both the design and timing of changes.’
Helping with digital compliance
HMRC’s new world focuses on digital compliance, which will inevitably challenge taxpayers. We are on hand to advise on the best way ahead for you and your business. Please don’t hesitate to contact us with any queries you may have.
It may not be as straightforward as you think.
When is a volunteer not a volunteer? When they’re a worker as regards employment status?
It’s a question that the Court of Appeal will be considering later this year, when it reviews the case of Coastal Rescue Officer, Mr Groom.
Mr Groom volunteered for many years for the Coastal Rescue Service (CRS). The relationship unravelled when Mr Groom was subject to disciplinary activity, and asked to be accompanied by a trade union representative to the disciplinary hearing. Mr Groom was turned down because the right would only apply if he was a worker. The case ended up at the Employment Appeal Tribunal (EAT).
Not the label that matters
It’s not always appreciated that in law, there is no such thing as volunteer status. What matters isn’t the label, but the legal status behind it. Depending on the exact details of the individual arrangement, there’s a possibility that someone described as a ‘volunteer’ could, be held to be a worker, or an employee for employment status purposes. Both types of status carry significant employee rights and employer responsibilities, such as minimum wage and entitlement to paid holidays.
Check the reality
One of the defining features of a worker is working under a contract. In this particular case, the CRS argued that there was no contract. Its handbook for volunteers said that the relationship was a ‘voluntary two-way commitment where no contract of employment exists’.
The EAT, however, looked at the reality underlying all this. It noted that Mr Groom worked under a Volunteer Agreement. This sets out minimum levels of attendance at training and incidents, and expectations to uphold the CRS’ professional reputation. But what made the critical difference was the issue of payment.
Though many of Mr Groom’s activities were unpaid, he was entitled to submit monthly claims for payment for others. The volunteer Code of Conduct stated that such payment was ‘to cover minor costs caused by your volunteering, and to compensate for any disruption to your personal life and employment and for unsocial hours call-outs’. Submitting claims is optional, and it was noted that some volunteers chose not to claim.
Take-away message
The EAT ruled that ‘the only proper construction of the documents is that a contract comes into existence when a [volunteer] attends an activity in respect of which there is a right to remuneration’.
The decision doesn’t mean that every volunteer is to be classed as a worker. Even for Mr Groom, the question of whether worker status applied for unpaid activities was left to be decided at another time. Nevertheless, anyone using volunteers – or offering work experience or internships – will want to be sure they don’t run the risk of their arrangements being classified as conferring worker or employee status. The Court of Appeal’s verdict will be important to watch.