MTD expected to cost £1 billion more than originally forecast

16 Jun 2023

A report published by the National Audit Office (NAO) has found that HMRC's Making Tax Digital (MTD) initiative is expected to cost around £1 billion more than its initial £226 million budget, which was forecast in 2016.

MTD is intended to modernise the tax system for income tax self assessment, VAT and corporation tax. It requires taxpayers to keep records digitally and submit quarterly tax returns.

Whilst the NAO said that HMRC's vision to digitalise the UK tax system 'has the potential to bring about a step-change in the system's efficiency and effectiveness', it also labelled HMRC's initial timeframe for the implementation of MTD as 'unrealistic'. It stated that bosses 'failed to take the scale of the task into account'.

Commenting on the matter, Gareth Davies, Head of the NAO, said: 'The repeated delays and rephasing of MTD have undermined the programme's credibility and increased its costs. They put at risk the support of taxpayers and delivery partners, including those who are essential to the programme succeeding.'

The NAO has recommended that HMRC prepares a separate business case for MTD for Income Tax Self Assessment (MTD for ITSA) so that those making decisions can better understand the costs, benefits and risks associated with the initiative. It has urged HMRC to include 'greater clarity' on how taxpayers will be affected.