Making Tax Digital for Individuals

The gov­ern­ment has start­ed phas­ing in its land­mark MTD ini­tia­tive, which will see tax­pay­ers move to a ful­ly dig­i­tal tax sys­tem.

In this fact­sheet we out­line some of the key issues for indi­vid­u­als includ­ing the Per­son­al Tax Account and Sim­ple Assess­ment.

Making Tax Digital

Mak­ing Tax Dig­i­tal for Busi­ness (MTDfB) was intro­duced in the 2015 Spring Bud­get. The government’s ‘Mak­ing Tax Eas­i­er’ doc­u­ment was pub­lished short­ly after and out­lined plans for the ‘end of the tax return’. It also set out the government’s vision to mod­ernise the UK’s tax sys­tem, with dig­i­tal tax accounts set to replace tax returns for ten mil­lion indi­vid­u­als and five mil­lion small busi­ness­es.

Revised timescales

How­ev­er, indus­try experts and those with­in the accoun­tan­cy sec­tor expressed con­cerns over the pro­posed pace and the scale of the intro­duc­tion of MTDfB. As a result, the gov­ern­ment amend­ed the ini­tial timetable for the ini­tia­tive’s imple­men­ta­tion, to allow busi­ness­es and indi­vid­u­als ‘plen­ty of time to adapt to the changes’.

MTD for Income Tax has been intro­duced from April 2026, with busi­ness­es, self-employed indi­vid­u­als and land­lords with income over £50,000 man­dat­ed to join first, a change from the orig­i­nal £10,000 lim­it.

Those with income over £30,000 will be man­dat­ed from April 2027 and those with income over £20,000 from April 2028.

Fol­low­ing the new approach, the gov­ern­ment will not extend MTD for Income Tax to gen­er­al part­ner­ships in 2026.

What will be required?

Mak­ing Tax Dig­i­tal for Income Tax is a new way of report­ing income and expens­es if you’re a sole trad­er or land­lord.

Under the new way of report­ing, sole traders and land­lords will use com­pat­i­ble soft­ware that enables them to:

• cre­ate and store dig­i­tal records of their busi­ness income and expens­es
• send quar­ter­ly updates to HMRC
• sub­mit a tax return and pay tax due by 31 Jan­u­ary the fol­low­ing year.

The Personal Tax Account

Per­son­al Tax Accounts (PTAs) are dig­i­tal tax accounts for indi­vid­u­als that have been cre­at­ed by HMRC, and are pre-pop­u­lat­ed with infor­ma­tion held by it. PTAs are designed to per­mit indi­vid­ual tax­pay­ers to com­mu­ni­cate with HMRC, allow­ing them to update their finan­cial details and check their tax affairs in real time.

Tax­pay­ers may make use of a PTA to make tax pay­ments, pro­vide bank details to HMRC for tax refund pur­pos­es and pro­vide details of tax­able ben­e­fits from employ­ment: for exam­ple, the use of a com­pa­ny car.

Indi­vid­u­als can reg­is­ter for a PTA by vis­it­ing www.gov.uk/personal-tax-account. The gov­ern­ment pre­dicts that, over time, the require­ment to com­plete and file a tax return will lessen for those with straight­for­ward tax affairs.

Simple Assessment

Under Sim­ple Assess­ment, HMRC has the pow­er to assess an indi­vid­u­al’s lia­bil­i­ty to Income Tax or Cap­i­tal Gains Tax, with­out the tax­pay­er hav­ing to fill out and sub­mit a tax return.

Sim­ple Assess­ment may be used to deal with the tax lia­bil­i­ties of:

• State pen­sion­ers whose state pen­sion is high­er than their per­son­al tax allowance where the tax owed can­not be col­lect­ed via their tax code.
• Tax­pay­ers with PAYE lia­bil­i­ties who have under­paid tax and can­not have it col­lect­ed via their tax code.

Tax­pay­ers are required to ensure that the infor­ma­tion pro­vid­ed by HMRC is cor­rect, and pay their Income Tax lia­bil­i­ty online, or by cheque, before a spe­cif­ic dead­line, as out­lined with­in the let­ter they receive. If the tax­pay­er believes the infor­ma­tion to be incor­rect, cus­tomers are giv­en 60 days to con­tact HMRC.

Those that miss the dead­line are encour­aged to con­tact HMRC in order to dis­cuss their cir­cum­stances. Indi­vid­u­als who fail to do so may be sub­ject to penal­ties.