Making Tax Digital

Baroness Kramer Excerpts

Wednesday 17th September 2025 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to my noble friend for his question. HMRC has taken a range of steps to ensure that the adoption costs of Making Tax Digital are kept to a minimum, including working with industry to ensure that there is free and low-cost software available where necessary. The use of Making Tax Digital should bring significant benefits by increasing accuracy, reducing the time it takes to complete tax returns, and therefore increasing productivity. The rollout of Making Tax Digital encourages taxpayers to adopt digital solutions. For example, of those businesses already using Making Tax Digital for VAT, one-third have used the software for other business processes. More broadly, the Government are actively promoting digital technology adoption for small businesses, which is key to unlocking productivity and growth, and helping firms reduce administrative burdens. In our small business plan, we accepted all 10 recommendations from the industry-led Digital Adoption Taskforce.

[Baroness Kramer (LD)]

My Lords, Making Tax Digital is not targeted at upskilling self-employed people and landlords; it is about cutting costs at HMRC. The requirements have led to a surge in calls to HMRC for guidance, but over half a million calls went unhandled in January, and the same in February, the last months for which I have numbers. How is this being handled, given that people who fail to comply face steep fines and penalties, and that when they rely on the internet they are at risk of being scammed?

[Lord Livermore (Lab)]

If I may, I disagree with the premise of the noble Baroness’s question. Making Tax Digital is about increasing productivity for businesses and helping HMRC close the tax gap, which I am sure the noble Baroness would agree should be a priority. There are clear benefits of Making Tax Digital, such as productivity gains to improve business operations, easier and faster tax returns by promoting digital record-keeping, and greater accuracy by reducing errors for tracking paper records. There is a substantial tax gap, and Making Tax Digital will reduce that by nearly £6 billion—some £4 billion for VAT and £1.95 billion for income tax. By doing that, and enabling HMRC to have the correct resources, it is able to direct resources where they are most needed, which addresses the point the noble Baroness was making.