Important updates to Making Tax Digital and late payment rates you might have missed in the Spring Statement
This week’s Spring Statement brought two announcements that will matter to anyone running their own business or earning income from property.
Firstly, there will be tougher penalties for late tax payments under Making Tax Digital (MTD).
Secondly, the MTD scheme itself is being extended to bring in those earning over £20,000 from 2028.
Both changes mean more admin, stricter deadlines and bigger costs for getting things wrong, just as many business owners are already feeling stretched.
Harsher penalties for late payment from April 2025
At the moment, there is a small window after the tax deadline where no penalty applies.
If you pay your outstanding tax within the first 15 days, you are in the clear.
After that, the current charge is two per cent at day 15, and then another two per cent at day 30, totalling four per cent.
From April 2025, the penalties will get steeper, but only for those in the Making Tax Digital (MTD) system.
Under the new rules, if your tax bill is still unpaid after 15 days, the charge will be three per cent.
If it is still unpaid after 30 days, that rises to six per cent in total.
It does not stop there. The annual interest rate on late payments is also going up from four per cent to 10 per cent.
The Government says the aim is to encourage people to pay on time.
Whether you agree with the reasoning or not, the outcome is the same: the cost of paying late is going up sharply.
These charges could be painful for anyone dealing with cashflow issues or who simply forgets to sort their tax on time.
What can you do ahead of these changes?
If you are in the MTD system (or will be soon), make sure your bookkeeping is up to date and that you have money set aside for tax bills in advance.
Leaving things until the last minute is likely to cost more than ever. If you struggle with the admin side, it might be time to consider using cloud accounting software or working with our accountants, who can help keep you on track.
MTD net widens in 2028
We already knew that the next phase of Making Tax Digital for Income Tax (MTD ITSA) is coming – starting in April 2026 for sole traders and landlords earning over £50,000, and then extending to those earning over £30,000 in 2027.
The subtle announcement in the Spring Statement revealed that by 2028, all self-employed individuals and landlords earning over £20,000 will also be brought into the system.
This means more people will need to send quarterly updates to HM Revenue & Customs (HMRC), not just one tax return a year.
If you are not already using digital tools for your record-keeping, consider doing so in the near future.
Quarterly reporting does not need to be difficult, but it does require a change in how you handle your accounts.
Getting used to a system now before it becomes mandatory will save you stress later.
You will also want to keep an eye on your income.
If you are hovering around that £30,000 mark, for example, you might not be caught by MTD in 2026 but could be by 2027.
It is worth speaking with us about what this means for you and how to plan ahead.
The message from the Government is fairly clear: keep your records digital, file regularly, and do not be late paying your tax.
These changes are unlikely to be reversed, and the costs of getting things wrong are going up.
If you are unsure how these changes affect your business or want help putting better systems in place, speak to our team today.
