Making Tax Digital plans will penalise vulnerable and low-paid workers
Many disabled people are already only surviving because of their ability to work and earn alongside their rights to state support.
Chancellor Rachel Reeves desperately needs to extract more income tax out of the British people and she thinks she’s found something hidden down the back of the sofa. In fact, for accuracy, the Conservative government before her spotted it first – but the new Chancellor has failed to notice that all they had detected was fool’s gold.
From April 2026, anyone who is self-employed and earning more than £50,000, or anyone who rents out a property, must start to submit digital tax updates to HMRC every 12 weeks. By 2028, it will be rolled out so that anyone with a turnover – not profit, remember – of £20,000 will be expected to do the same. It’s a fiddly process requiring new, compatible software and an investment either in personal time or in a costly accountant to do all the work for you. And it’s going to make low paid workers furious, especially those who are already clinging onto their earnings by fingernails.
The government thinks that by only filing a single tax return once a year, freelance workers are forgetting to declare some of their income. Perhaps their paperwork got a bit sloppy mid-year, they hope; maybe they haven’t noticed that those invoices went out inside the last quarter, and that tax is owed now?
The government seems to assume that this ‘Making Tax Digital’ policy will lead to a significant tax boost, but the reality is going to be the opposite. Accountancy experts say it’s not profits that are forgotten or under-declared by freelance workers, but their legitimate expenses; if anything, tax bills will end up going down. And worse, both socially and economically, benefit bills will go up too.
Once the threshold for quarterly reporting has hit £20,000, even people who pay no income tax at all will be covered. Low earners and those who are already economically excluded are hardest hit by this new administrative burden. Worried accountants argue it will have a devastating effect on the work participation rate of those with disabilities, caring responsibilities and seasonal earning patterns, complex benefit rights and language barriers.
“These things are not just a source of anxiety, they are impossible for some. I really worry about tradespeople where English isn’t their first language,” says Robyn Milstead, director of tax at LKA Chartered Accountants. “For single parents who are self-employed, the first deadline for the quarterly submission is 7th August – straight in the school holidays.”
Take disability as another example. An equalities impact assessment produced by HMRC on the policy claims, “where a person already complies with requirements to send information electronically and uses assistive technology, the MTD requirements should not impose additional costs to meet their accessibility needs.” But after clarifying on behalf of her clients, Milstead confirmed this week that none of the compliant software packages the government suggests are used to file these quarterly returns are free to use once you filter for accessibility features. That means there are no free options at all for anyone with accessibility needs.
The financial burden of Making Tax Digital is higher for disabled people who are already disproportionately likely to be self-employed, to have existing benefit rights, to have a fluctuating income pattern and to be earning a lower amount. Milstead and many of her colleagues are convinced that thousands of people like these – perhaps tens of thousands – will drop out of the workforce altogether, either retiring early if possible or adding to their benefit claims, as a result of these additional tax admin burdens.
“Pushing this pair of policies together will drive people out of work, into poverty and dependence. It’s economically illiterate, and socially dangerous.”
Of course that matters at a fiscal level; this country needs every penny of tax it can find to repair our fractured public services and build trust in the public realm. But it matters socially too. Pushing already economically vulnerable people out of work hits their sense of self, their independence and their relationship with the state.
Making Tax Digital is being rolled out at the same time as a brutal reform of disability benefits. Many disabled people are already only surviving because of their ability to work and earn alongside their rights to state support. Benefit cuts will make their situation even more precarious. Pushing this pair of policies together will drive people out of work, into poverty and dependence. It’s economically illiterate, and socially dangerous.
Troubling on its own, it also highlights a much bigger pattern of splintered thinking on policy as the government pushes for growth. It’s the same lack of sophistication that sees the very sector we are apparently so dependent on – the rise of tech British expertise – seeing its reputation undermined by an ill-thought-through immigration crackdown.
This government says it bases its decisions on expertise, but right now we’re desperate for someone who can see the big picture.■
About the author: Hannah Fearn is a freelance journalist specialising in social affairs. She was comment editor of The Independent for seven years, and has previously worked for The Guardian, Times Higher Education and Inside Housing. She has a special interest in inequality, poverty, housing, education and life chances.
The Lead is keeping an eye on Reform UK and their fellow travellers. Get in touch on X, Bluesky and Instagram or email ella@thelead.uk with tips and stories. We especially want to hear from readers whose local council is now run by Farage’s followers.
We start with some chilling news in Nottinghamshire where the local news titles there – Nottingham Post and Nottinghamshire Live – are facing a ban from the Reform-led council. It means journalists can’t ask basic questions of the leader and the county council. Not surprisingly, Lee Anderson has waded in to support the county council’s actions. But there is national concern about Reform’s disregard for a free and independent local press. Editor of NottinghamshireLive, Natalie Fahy, has made her feelings clear and quite rightly asked, what have you got to hide?
‘Drill baby drill?’ in a Trumpian style announcement Richard Tice was doing the rounds saying Reform is in support of fracking and if they won a general election in 2029 it would be all systems go. The controversial energy extraction process has been halted in recent years – and attracted large-scale and long-running protests across the country. Lancashire is one of the places where fracking has been in sharp focus and in this week’s Lancashire Lead we reported how the Reform-led county council might not agree with their national paymasters on the idea for a return to fracking in the Fylde.
Defections continue to Reform, with Sefton Council seeing the first councillor to cross the floor to become the sole light blue representative. But everyone has a past and it raises questions, again, of what kind of vetting Reform do on those wanting to join their crew? As we report in The Southport Lead, Cllr Morris has made a series of racist and bigoted social media posts. Or maybe that is needed on the CV to become a Reform party representative.
And finally, help us investigate. One of the areas Reform is responsible for is education – but what are their plans? It's not clear. We're looking in to what Reform-led councils are attempting when it comes to educating our children. But we need your help to do this, if you're a teacher, school worker or know someone who is you can use this form to help our investigation.
The Lead Digest
Here at The Lead, we like to consume just as much as we create, which is why we spend a little time each week rounding up our favourite stories, books, podcasts and films to offer our readers a sample of the work that informs our world.
Luke recommends this uplifting read about how Norway reduced homelessness by half – which does take into account differences in population sizes but still has ideas. Lessons to be learnt.
Natalie loved this in-depth interview with British-Jamaican poet Raymond Antrobus ahead of the release of his memoir, The Quiet Ear. he loves how the deaf artist describes himself as an “investigator of missing sound”.
Zoë is highlighting this Guardian article from Raf Behr, which suggests all roads lead back to Brexit, including the one that puts the final nail in Farage's coffin.
Ed is feeling inspired after reading this interesting idea for increasing community cohesion and civic pride – an activities fair for each town and city. It could be just the thing to energise your local area.
At The Lead we’re dedicated to telling stories beyond the bright lights of London and Manchester (although sometimes we still will). We have dedicated journalists and titles in Blackpool, Lancashire, Calderdale, Teesside and Southport bringing in-depth news and features twice-a-week to those communities. You can subscribe to support our vital local journalism.
Blackpool's Multiversity project is seen as a cornerstone of their plans to help turn the town around through development. But it required the purchase of several streets of homes, to be demolished, to be viable. Alistair Taylor was found dead at home after agreeing the sale of his home, with The Blackpool Lead finding both his parents and legal representatives had said that the council overstepped the mark and failed to deliver what was promised in doing so. Now, the council's potential role in his death will be examined at inquest.
Cleveland Fire Brigade Risk Management Services CIC (or CFB for short) was a commercial venture owned by the public Cleveland Fire Authority. Lawyers were due to appear in court last week after a winding-up petition was submitted by His Majesty’s Revenue and Customs [HMRC] over an unpaid tax bill, but councillors decided to liquidate the company before the court date. The Teesside Lead reports.
Thanks for reading our Thursday newsletter. Make sure you’re subscribed to The Lead so you don’t miss any of our upcoming editions this weekend. Tomorrow, Lauren Crosby Medlicott will untangle what it would actually mean to leave the ECHR. And on Saturday, Fred Garrett-Stanley reports from Brighton and Leicester to find out where people can go for a really good night out these days.
And in the next fortnight we have a bumper two-parter from Zoë Grünewald all about tax – what needs scrapping, reforming or introducing to make a real difference. Sign up to make sure you don’t miss a thing.
Ed, Zoë, Ella, Luke, Natalie, Padraig, and The Lead team.