Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what steps her Department is taking to help ensure (a) that the rollout of digital quarterly submissions for tax returns under MTD for ITSA does not lead to penalties for non-compliance and increased stress for vulnerable groups who do not have the digital skills or digital access to meet the new requirements and (b) that measures are in place for people without digital access or digital skills to continue to submit manual books where necessary.

Making Tax Digital (MTD) for Income Tax is designed to make it easier for users to get their tax right and keep on top of their affairs. Taxpayers will use software to keep digital records and send simple quarterly updates to HMRC; in turn, this will help to finalise their Income Tax position after the year end.

A new fairer penalty regime will also be introduced to support taxpayers submitting more frequent updates under MTD. They will not be penalised for occasionally missing a deadline. Instead, they will receive a penalty point towards a points threshold. They will only receive a financial penalty once that threshold is met.

The government recognises that not everyone is able to interact with HMRC digitally. Digitally excluded taxpayers will be able to apply for an exemption from MTD and will continue to file using existing processes. HMRC will set out further information on the exemption process when it opens later in 2025.