In this week’s Enews, we look at news on the penalty regime for Making Tax Digital for Income Tax. There is also news on mandatory e-invoicing for VAT-registered businesses and amendments to the Employment Rights Bill to update you on.
MTD penalties waived for first year of Income Tax
Self assessment taxpayers due to join Making Tax Digital (MTD) for Income Tax next April will not face penalties if late filing quarterly updates.
In the Autumn Budget 2025 documents, the government said it will not charge penalty points if those joining MTD submit any of their compulsory quarterly updates of income and expenses late during 2026/27.
This means that the first group of taxpayers earning non-PAYE income over £50,000 will not be liable for the new penalty regime under MTD until April 2027.
HMRC will apply the new penalty regime for late submission and late payment to all income tax taxpayers from 6 April 2027.
The new system is based on a points-based sanctions regime and will penalise those who persistently do not comply by missing filing and payment deadlines.
Under the new regime, when a taxpayer misses an annual submission deadline, they will incur a penalty point. A taxpayer becomes liable to a fixed financial penalty of £200 only after they have reached the points threshold of two for late submission of their final declaration.
Sharron West, Technical officer at LITRG, said:
‘We’re pleased to see the government defer penalties for the first year of Making Tax Digital.
‘Making Tax Digital is the biggest change to the tax system since self assessment and because of that, we expect that there will be some teething problems when it goes live in April.
‘This period of grace is especially good news for those who will be getting used to the new system without the help of a tax adviser.’
Internet link: CIOT website
E-invoicing will be fundamental change for VAT-registered businesses
The mandatory introduction of e-invoicing for all VAT-registered businesses selling to UK business customers from April 2029 will be a fundamental change, says the Chartered Institute of Taxation (CIOT).
The government announced the requirement in the Autumn Budget 2025 policy documents.
It said: ‘Continued collaboration between the government and the private sector is essential for driving innovation. To drive productivity further, the government will require the use of electronic invoicing for all VAT invoices for business-to-business and business-to-government transactions from 2029, with a roadmap to be published at Budget 2026.’
The CIOT is cautioning the government against rushing into mandatory e-invoicing, calling for the use of thresholds and staged implementation to try to mitigate the impact of such significant digital change.
E-invoicing is a digital exchange of invoice information directly between the supplier and customer’s accounting systems; invoices sent electronically by email with a pdf or jpeg format attachment will no longer suffice.
CIOT spokesperson Alison Kerrey said:
‘E-invoicing is a fundamental change for businesses. This goes further than Making Tax Digital, because it is not just digital record keeping, it is communicating digitally with customers and suppliers.
‘We are particularly concerned that those businesses that only issue and receive a handful of invoices per year will face disproportionate costs.
‘The CIOT support moves to increase the adoption of e-invoicing. But if there is to be a mandate, there need to be real benefits to HMRC and UK businesses and sensible, realistic implementation.’
Internet link: CIOT website
Sensible solution on unfair dismissal will deliver faster improvements
Reducing the qualifying period for unfair dismissal protection is a sensible move, says the Resolution Foundation.
The government is amending the Employment Rights Bill to reduce the qualifying period for unfair dismissal protection from two years to six months, rather than scrapping altogether for a ‘day one’ right.
This is a sensible move that will speed up the delivery of improvements to working conditions and reduce the risk of firms being put off hiring, said the think tank.
The UK currently has a two-year qualifying period for unfair dismissal protection – meaning workers can be well established in their job but still lack this protection.
According to the Foundation, other rich countries which have unfair dismissal protection typically have much shorter qualifying periods, reflecting the fact that it does not take employers more than a few months to judge whether a new hire is a good fit.
But getting rid of qualifying periods altogether would have been a step too far in the other direction, risking putting employers off hiring, it adds.
Nye Cominetti, Principal Economist at the Resolution Foundation, said:
‘The UK currently has one of the longest qualifying periods for protection which needs to come down. But scrapping it entirely would have meant lurching from one extreme to the other and putting firms off hiring new workers.
‘This sensible move to a six-month qualifying period will bring the UK into line with other countries, deliver tangible improvements to working conditions, and help the government move forward with other key aspects of the Employment Rights Bill.’
Internet link: Resolution Foundation
