The UK’s digital transformation of tax reporting is entering a pivotal phase with the expansion of Making Tax Digital, a scheme designed to overhaul how millions of self-employed individuals and landlords interact with HMRC. Positioned as a step towards modernising the tax system, the reform introduces mandatory digital record-keeping and more frequent reporting requirements.
While the policy is aimed at improving efficiency and reducing tax errors, its implementation has raised concerns across the accounting profession and among vulnerable workers. Critics argue the shift risks penalising those already facing barriers to digital access, creating unintended consequences for groups such as low earners, single parents and non-native English speakers.
Digital Tax Overhaul Takes Shape Under New Government
The UK government’s Making Tax Digital (MTD) scheme is poised to reshape how millions of self-employed people manage their finances. According to Yahoo News UK, the initiative aims to modernise tax processes by requiring quarterly digital submissions and a final year-end declaration to replace the current annual Self Assessment system.
This reform, now moving ahead under the Labour Party, targets income tax compliance for the self-employed and landlords. Under MTD for Income Tax Self Assessment (MTD ITSA), individuals with income from UK property or self-employment above a set threshold will be required to keep digital records and file through approved software.
While HMRC maintains that the policy reduces tax errors and improves compliance, professionals and stakeholders say it may unintentionally harm groups already struggling with digital literacy or time constraints.
Experts Highlight Digital Divide and Increased Burden
Industry voices have raised serious concerns about the reform’s practical implications. Robyn Milstead, director of tax at LKA Chartered Accountants, told Yahoo News UK that the system is “not just a source of anxiety” but “impossible for some”. She emphasised the impact on self-employed parents and workers whose first language is not English, particularly highlighting the 7 August quarterly filing deadline, which falls during school holidays.
Tom Bickle, principal accountant at JP Blackmoor Limited, echoed this sentiment, citing the intense pressure MTD will place on single parents trying to balance business responsibilities with childcare. “It’s hard to imagine how so many single parents are going to find the time,” he stated. Concerns also extend to individuals with low computer literacy or those unable to afford bookkeeping software.
While HMRC asserts that free and low-cost software options will be available, critics argue this does not address the core problem: providing software does not equate to providing the skills or time needed to use it effectively. According to Milstead, many small business owners feel that quarterly updates are invasive and disproportionately burdensome for those with minimal administrative support.
A spokesperson for HMRC responded, stating the organisation has worked extensively with “customers, representative bodies and software developers” to ensure smooth implementation. Yet, professionals continue to call for broader exemptions and support measures to avoid the unintended consequence of forcing vulnerable groups out of self-employment altogether.
