HMRC announces three new tax rules with millions of UK households warned

Rachel Reeves may have to raise UK taxes in October

UK Chancellor Rachel Reeves outlined her economic plan in the Spring Budget statement, aiming to meet her own fiscal rules without introducing new tax measures—achieved through welfare and spending cuts. On the surface, this may seem like good news. However, analysts believe this is only temporary, and the Treasury is highly likely to introduce further tax hikes in the Autumn Budget in October.

Paul Johnson, director of the Institute for Fiscal Studies think tank, stated, “Economic forecasts are very likely to worsen significantly before the October budget, which would mean further tax increases.”

When asked about the possibility of further tax hikes in the autumn, UK Prime Minister Keir Starmer did not rule it out but said, “Clearly, I’m not going to commit to the content of future budgets now—no Prime Minister or Chancellor in any government has ever done that,” he told reporters.

“But if you look at the content and intent of both the Autumn Budget and the Spring Budget statement, you will see that when it comes to the decisions we must make, we have not blindly opted for tax increases. I think that demonstrates our approach.”

Labour had pledged in its election manifesto not to increase taxes for “working people,” including National Insurance, income tax, and VAT. However, in last year’s Autumn Budget, the government raised employer National Insurance contributions, arguing that tax hikes were necessary to fill the “black hole” in public finances and invest in the NHS and other public services.

Meanwhile, global trade tensions could further challenge Labour’s fiscal plans—Donald Trump has announced a 25% tariff on all steel and aluminum exports to the US, with additional tariffs taking effect from April 2. The UK is currently engaged in “intensive negotiations” with the US to reach a deal that avoids these tariffs.

In a TV interview last week, when asked whether further tax hikes or spending cuts would be needed in October if economic conditions worsened, Chancellor Reeves acknowledged that “risks always exist” but also pointed to “opportunities” for economic growth, particularly through housing construction and planning system reforms.

The UK’s independent fiscal watchdog, the Office for Budget Responsibility (OBR), has downgraded its forecast for economic growth this year from 2% (as predicted in October) to just 1%. However, the OBR expects growth to exceed previous forecasts in subsequent years, partly due to an increase in housing construction.

UK may scrap digital services tax in exchange for US tariff exemption

According to British media reports, Cabinet members, including the Chancellor of the Exchequer and the Business Secretary, have suggested that the UK may consider scrapping the 2% digital services tax (DST) on US tech giants such as Facebook, Google, and Amazon. This move is being considered as a bargaining chip in negotiations with Donald Trump to secure an agreement that would prevent tariffs.

Earlier, Trump imposed a 25% tariff on all steel and aluminum imports to the US and signed another executive order last week targeting the automotive sector, imposing a 25% tariff on imported cars and auto parts.

The digital services tax was introduced in April 2020 by the former Conservative government. It applies a 2% levy on revenues generated in the UK by companies with global revenues exceeding £500 million.

A recent report by the UK’s National Audit Office (NAO) revealed that in its first year, the DST raised nearly £360 million from US tech giants, including Amazon, Google, and Apple—30% more than forecasted in 2021. Projections suggest that the tax will generate approximately £800 million for the UK government in the 2024-2025 fiscal year.

Clive Lewis, Labour MP for Norwich South, argued that any potential changes to the tax would be "a complete dereliction of duty." Another Labour MP stated, “At a time of economic difficulty, we should maximize revenue from the digital services tax rather than attempting to reduce it.”

However, some experts believe that scrapping the tax could ultimately be beneficial if it leads to the US exempting the UK from its tariff policies or securing other favorable trade agreements. So far, ministers have not committed to changing the tax but have left the door open as part of broader trade negotiations with the US.

Last week, Chancellor Rachel Reeves also indicated that she would not rule out modifying the DST in exchange for tariff exemptions from the US. She told the BBC: “We need to strike a balance. These discussions are ongoing, and we want to make progress without subjecting UK exporters to higher tariffs.”

UK Business Secretary Jonathan Reynolds echoed this sentiment, stating, “This tax was never meant to be permanent.” He noted that the DST was introduced as a temporary measure by former Prime Minister Rishi Sunak due to concerns that multinational tech giants were shifting profits overseas instead of paying taxes in the UK.

The UK originally planned to phase out the tax three years ago, but this has yet to be implemented.

HMRC announces three new tax rules with millions of UK households warned

UK Tax Authority (HMRC) Announces New Making Tax Digital (MTD) Rules for Millions of Households

The UK’s tax authority, HMRC, has introduced three new income tax rules under the Making Tax Digital (MTD) initiative, affecting millions of landlords across the country. The first implementation date is set for April 2026:

● From April 6, 2026: Landlords with an annual income (total revenue before deductions) exceeding £50,000 must register for an MTD account for income tax filing.

● From April 6, 2027: Landlords with an annual turnover exceeding £30,000 will also be required to register for MTD.

● From April 6, 2028: As confirmed in the Spring Budget, the third phase of the scheme will extend to landlords with an annual income of £20,000, following the government’s announcement in the Autumn Budget 2024.

What is Making Tax Digital (MTD)?

MTD is a tax digitization initiative introduced by the UK government to streamline tax processes, improve efficiency, reduce errors, and offer a more convenient experience for taxpayers. By introducing digital records and real-time tax reporting, the system aims to gradually replace traditional tax filing methods.

How to Register for MTD?

If you do not yet have an HMRC account, you need to register on the HMRC website first. After that:

1. Log in to your Government Gateway account.

2. Select "Register for MTD services".

3. Follow the instructions and provide the necessary details, including your National

Insurance Number (NI Number), VAT Registration Number (if applicable), and other required information. Once your registration is submitted, HMRC will send you a confirmation email, and you can start submitting digital tax returns using compatible software.