HMRC will evaluate the impacts of MTD for Income Tax as it is rolled out to those with income over £30,000 from April 2027 and for those with income over £20,000 in April 2028.

There are different ways of setting up a business in the UK for entrepreneurs and traders. Incorporated status offers a separate legal identity, with associated registration, filing and transparency obligations. As a consequence of this, Companies House maintains a register of incorporated companies. However, this model is not the right one for everyone, and businesses will choose the model that is the best fit for them. Sole traders do not have a separate legal identity and are not subject to Companies House filling obligations; a register of sole traders would therefore primarily record contact information. All businesses are required to register with HMRC for tax purposes, and with licencing bodies, local authorities or professional bodies where appropriate.

At £90,000, the UK has a higher VAT registration threshold than any EU country and the joint highest in the OECD. This means the majority of UK businesses are not in the VAT system at all, reducing administrative burdens and supporting their growth.

The Government’s approach to the VAT registration threshold aims to balance the impacts on small businesses, including their growth and financial sustainability, with the needs of the wider economy and the public finances. Increasing the VAT registration threshold would come at a significant fiscal cost and reduce the revenue available for vital public services.

More than £1.5 billion is being made available over the Spending Review period for investment in employment and skills support. This includes £725 million for the Growth and Skills Levy, to help support apprenticeships for young people and fully fund SME apprenticeships for under-25s.

Making Tax Digital will help businesses and landlords keep on top of their tax affairs. It places small businesses on a more digital footing, with digital tools helping to reduce errors and make annual tax returns easier.

The government is undertaking a range of activities to ensure those needing to use MTD for Income Tax from April 2026 are ready and able to do so successfully.

This includes targeted media campaigns, awareness letters, developing guidance, and working with the software industry to ensure a broad range of MTD-compatible products is available, to suit different needs and budgets. Free options will support those with the simplest affairs.

Supporting its introduction is a dedicated team of fully-trained MTD advisors. From April 2026, new options will be available on HMRC’s Self-Assessment and Agent helplines tailored to the needs of MTD users.

Further support will continue to be offered through webinars, industry engagement and marketing activities targeted to reach those affected by the changes.

HMRC’s latest published assessment of the potential impact of MTD for Income Tax across different taxpayer groups is available at:

Extension of Making Tax Digital for Income Tax Self Assessment to sole traders and landlords - GOV.UK

HMRC’s latest published assessment of the potential impact of MTD for Income Tax across different taxpayer groups is available at:

Extension of Making Tax Digital for Income Tax Self Assessment to sole traders and landlords - GOV.UK

The government has worked with stakeholders to understand costs and benefits impacts, and with the software industry to ensure a wide range of low cost and free software is available for those with the simplest affairs.

Making Tax Digital (MTD) for Income Tax will be introduced from April 2026 for sole traders and landlords with qualifying income over £50,000. It will be extended to those with income over £30,000 from April 2027 and for those with income over £20,000 in April 2028. In total around 2.9m businesses and landlords will need to use MTD for Income Tax. Sole Traders and landlords below these thresholds will still be able to file their Self Assessment returns as they do now.

HMRC has undertaken detailed assessments of the potential impact of MTD for Income Tax across different taxpayer groups, including self-employed individuals, small businesses, and landlords.  The latest published assessment is available at:

Extension of Making Tax Digital for Income Tax Self Assessment to sole traders and landlords - GOV.UK

MTD for Income Tax is a new approach that is designed to help customers avoid errors and make their annual tax returns easier. The government has taken steps to minimise costs to businesses resulting from MTD, including working with the software industry to ensure free software is available for landlords and other businesses with simple affairs.

HMRC is providing a range of support to taxpayers transitioning to MTD, including guidance in various formats, accessible video content and webinars. HMRC is testing the MTD service with thousands of users, and using dedicated teams to ensure the right support is available.

Those who genuinely cannot operate MTD because it is not reasonable for them to do so will be able to apply for an exemption from MTD requirements.

The Government provides a range of support to inventors, including sole traders, so they may identify, protect and commercialise their intellectual property through tools found on GOV.UK.

The Government considers the fees charged by the Intellectual Property Office (IPO) to apply for patents to be accessible and comparatively low compared to other jurisdictions.

The IPO works in partnership with a range of organisations that can help inventors bring ideas to market. In addition, the UK’s innovation agency, Innovate UK, provides a range of support services to help innovators.

Making Tax Digital (MTD) for Income Tax quarterly updates are not the same as full tax returns. They are simple summaries of income and expenses. Software will automatically draw data from a taxpayer’s digital records, and, where these are up to date, the updates will be quick and easy to submit.

Quarterly updates will reduce errors by moving record-keeping closer to real time underpinning the £1.95bn of Additional Tax Revenue that MTD for Income Tax is expected to generate by 2029/30.

They also enable estimates of tax liability as well as nudges and prompts to support users to get their tax right. With records captured digitally in software, preparing the end-of-year return should be more straightforward, as the information needed is already available.

The government recognises that not everyone is able to interact with HMRC digitally. Customers that consider themselves digitally excluded will be able to apply for an exemption from Making Tax Digital for Income Tax. HMRC will provide further information about the exemption process later in 2025.

Approved Mileage Allowance Payments (AMAPs) are used by employers to reimburse an employee’s expenses for business mileage in their private vehicle. These rates are also used by self-employed drivers to claim tax relief on business mileage (simplified motoring expenses).

In considering potential changes to the AMAP/simplified motoring expenses rates, the Government would need to balance support for individuals with the responsible management of public finances which fund our essential public services.

Growth is the key mission for this government and supporting firms of all sizes to innovate is key to unlocking it. Innovate UK, the UK’s national innovation agency, supports over 10,000 businesses annually on their innovation journey and over the final six months of the previous financial year, Innovate UK launched £276m of competitions. This is in addition to work underway to increase the availability of growth capital for innovative firms, which includes increasing the National Wealth Fund’s capitalisation to £27.8bn, reforms to the British Business Bank, and new pension reforms aimed at unlocking £80 billion of investment.

Small businesses are the heart of our high streets and communities and are essential to our vision for growth and economic success.

The Government is committed to improving access to finance for small businesses, including sole traders, so they can grow and reach new domestic and international markets. Sole traders can benefit from the Start Up Loans programme, which helps entrepreneurs access the finance and mentoring advice they need to make their business ideas a reality.

Additionally, UK Export Finance offers financial support to boost export activities and helps exporters win contracts, fulfil orders, and make payment guarantees.

I recognise that the EU General Product Safety Regulation (GPSR) may require changes for some businesses, including sole traders and those selling engineering products to the EU.

We have published guidance for Northern Ireland, which we regularly review, and continue to support businesses trading with the EU. Since October 2024, the UK Export Academy delivered eight free GPSR training sessions supporting over 5,000 users.

DBT's Export Support Service are now signposting businesses to verified external service providers specialising in GPSR via the Export Support Directory. These are paid for providers, so businesses should perform due diligence before entering commercial relationships.

The Government is supporting small businesses across the UK to understand and comply with the new EU General Product Safety Regulation (GPSR) and its application in Northern Ireland.

We have published information on GOV.UK regarding GPSR's application in Northern Ireland, which we regularly review, and continue engaging directly with businesses. Firms exporting to the EU should note that EU guidance is now available and may also wish to contact the Government's Export Support Service. Since October, the UK Export Academy has delivered five free online GPSR training sessions to over 2,600 attendees.

HMRC does not hold the data requested relating to people added to and removed from PAYE. The PAYE population is made up of around 35 million individuals, and precise numbers change frequently as customers take up their first PAYE employment or pension, start new employments or pensions, and leave old ones. Increasing numbers of customers also take up secondary or additional employments or pensions, and have other income sources which may or may not be taxed through PAYE.

HMRC does not hold the data requested relating specifically to sole traders registering for Self Assessment. There are around 12.1 million taxpayers who are expected to submit Self Assessment tax returns by 31 January 2025. That population includes sole traders, some of whom will have commenced or ceased trading during the 2023/24 tax year.

HMRC made no upgrades to its VAT repayment software in 2021. There are no current delays, other than those that may occur from time to time in the course of business when HMRC carries out additional checks on a repayment claim.

HMRC makes VAT repayments to over half a million VAT registered businesses every year, including sole traders. It is important that HMRC makes checks on repayments in order to prevent fraud. HMRC aims to complete these checks as quickly as possible to minimise disruption for businesses.

HMRC’s code of practice for dealing with delayed VAT repayment returns is set out in Notice 700/58. As explained in the notice, HMRC will in certain circumstances pay a repayment supplement if a repayment is not made within 30 days. Over 95 per cent of repayments are made within 10 days and over 99.75 per cent of repayments are made within 30 days.

The repair, maintenance and improvement sector (RMI) is not part of the Standard Industrial Classification (SIC). Therefore, whilst the Government has data from the Office of National Statistics (ONS) regarding the number of construction businesses operating, we do not maintain a database on how many of these businesses operate in the RMI sector, either solely or partially.

The most recent Construction Statistics annual tables were published by the ONS in December 2021 and relate to 2020 (please find the relevant data attached). Table 1.4 shows the value of RMI work carried out by businesses in different SIC sectors in Great Britain, and Table 3.5 provides information on the number of employees in such businesses, although the data does not show whether or not they undertake RMI work.

The ONS also publishes data on business counts by sector, country and legal status. The following data relates to March 2021 and only includes construction businesses in England which are registered for VAT and/or PAYE. It relates to SIC sector 412: Construction of residential and non-residential buildings, and it is therefore not specific to the RMI sector:

“Company” includes both limited by shares and limited liability partnerships, and “partnerships” refers to unlimited liability partnerships.

Sole traders are able to apply to offer jobs to young people through the Kickstart Scheme through a Gateway Plus. There are 4 organisations approved as a Gateway Plus – -

• Adecco Working Ventures in Partnership with the Federation of Small Businesses
• REED in partnership with the British Chambers of Commerce
• Manpower Group
• The Wirral Chamber of Commerce

The Gateway Plus is the employer of the young person participating in Kickstart and will ensure that the YP receives the additional support to improve their employability which is an essential part of the scheme. The young person will be placed with a host organisation linked to the Gateway plus for their six-month job – this is at no cost to the host organisation. Host organisations can include sole traders.

All Kickstart Jobs are subject to robust checking procedures. The checks we put in place when approving a Gateway Plus organisation ensure that any employer that the Gateway approves is subject to a level of checking and due diligence that DWP are satisfied with. These checks are part of the requirement of the Gateway Plus agreement.

Sole traders are able to apply to offer jobs to young people through the Kickstart Scheme through a Gateway Plus. There are 4 organisations approved as a Gateway Plus – -

• Adecco Working Ventures in Partnership with the Federation of Small Businesses
• REED in partnership with the British Chambers of Commerce
• Manpower Group
• The Wirral Chamber of Commerce

The Gateway Plus is the employer of the young person participating in Kickstart and will ensure that the YP receives the additional support to improve their employability which is an essential part of the scheme. The young person will be placed with a host organisation linked to the Gateway plus for their six-month job – this is at no cost to the host organisation. Host organisations can include sole traders.

All Kickstart Jobs are subject to robust checking procedures. The checks we put in place when approving a Gateway Plus organisation ensure that any employer that the Gateway approves is subject to a level of checking and due diligence that DWP are satisfied with. These checks are part of the requirement of the Gateway Plus agreement.

I refer the hon. Member to the answer I gave to the hon. Member for New Forest West (Sir Desmond Swayne) to Question 168813 on 24 March.