MTD IT: Key Updates
- Shepherd Partnership
- Jul 29
- 2 min read
July 2025 brought significant developments in the ongoing rollout of Making Tax Digital for Income Tax (MTD IT). While the decision to abandon MTD for Corporation Tax made the headlines recently, HMRC also released two new draft documents that could impact taxpayers preparing for MTD IT. Both documents are out for consultation until 16 September 2025.
Key changes proposed
1. More Flexible Penalties
HMRC will have discretion to cancel or reset penalty points, and even waive financial penalties in certain cases.
They can also backdate and reinstate penalties, making tracking more complex.
2. Updated Exemptions
New exemptions have been confirmed for:
Non-UK visiting performers
Ministers of religion
Lloyd’s underwriters
Taxpayers with enduring power of attorney
Recipients of blind person’s or married couple’s allowance
These groups will not need to join MTD IT during this Parliament, but the wording suggests that these exemptions are temporary, rather than permanent.
Where taxpayers apply for a digital exclusion decision, HMRC will no longer be required to reply within 28 days.
Conversely, where taxpayers have ceased to be exempt, they must now inform HMRC within 30 days, rather than the previous 3 months.
Where a taxpayer does not have a National Insurance number this will no longer be an automatic exemption. It will form part of a wider identity verification exemption.
HMRC will be able to create new exemptions, based on income, business type, or other characteristics.
3. Technical & Administrative Adjustments
Amendments to returns will need to be made digitally.
The start date has been clarified for those choosing calendar quarters. They will have a 1 April start date in the previous tax year to avoid lost days (e.g. 1–5 April).
Greater clarity on exiting MTD IT if your income falls out of scope.
We’re here to support you through the evolving MTD landscape. Please get in touch for tailored advice.
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