Source · Select Committees · Public Accounts Committee
Recommendation 30
30
Accepted
Extending Making Tax Digital to Income Tax Self Assessment will impose significant costs exceeding benefits.
Conclusion
In February 2024, HMRC estimated that extending MTD to Income Tax Self Assessment from 2026–27 would impose transitional costs of around £561 million on sole traders and landlords with incomes above £30,000, and the continuing annual costs of MTD to these taxpayers would exceed the continuing annual benefits by around £196 million.60 In the Autumn Budget 2024 the government announced that MTD will be extended to sole traders and landlords with qualifying incomes over £20,000 “by the end of this Parliament”.61 In written evidence provided after our evidence session HMRC further explained that its current plans for MTD for Income Tax will require around 3 million business customers within Income Tax Self Assessment to operate MTD and use compatible software and that around 4 million with income below £20,000 will remain non–mandated.62
Government Response Summary
The government states the observation is implemented, detailing its current practices for conducting customer research, using customer insights in service design, assessing changes against 'Customer Guardrails,' and publishing customer impact assessments in Tax Information and Impact Notes (TIINs).
Government Response
Accepted
HM Government
Accepted
5.1 The government agrees with the Committee’s recommendation. Recommendation implemented 5.2 HMRC conducts regular research with customers to understand their needs and perspectives. HMRC’s Government Social Researchers conduct qualitative and quantitative research, including nationally representative surveys, with thousands of customers each year. In 2024-25, HMRC delivered 18 commissioned and 15 in-house social research projects. Additionally, user research is a core activity of HMRC’s digital programmes. In 2024-25 HMRC conducted user research with 1,835 participants. Findings were used to inform design decisions on products and services. 5.3 HMRC currently uses customer and user insight as part of its end-to-end change lifecycle for designing new services or making changes to existing ones. This is a critical aspect of design to ensure the department builds solutions that address customer needs and a foundation for evaluating the impact of the service to identify areas of improvement or new opportunities for innovation. 5.4 As part of its business case process, HMRC assesses formal change against Customer Guardrails, a framework for ensuring customer needs are thoroughly considered. Evidence of identified customer needs, including assessment of impacts on customer costs and benefits, is then recorded through completion of an External Customer Impact Assessment document. This forms part of the documentation required by HMRC governance boards. 5.5 Customer impacts are published in the ‘Summary of Impacts’ section of Tax Information and Impact Notes (TIINs). Where a measure or policy change is driven by customer need, this can be set out in the ‘Background to measure’ or ‘Policy objective’ sections of a TIIN as appropriate.