The draft legislation, published on Legislation Day on 21 July 2025, relates to policy changes previously announced by the government, including at the Autumn Budget 2024 and the Spring Statement 2025. It has been published for technical consultation, which closes on 15 September 2025. Supporting documents published alongside the legislation include tax impact and information notes, which set out the policy intention and expected impacts, and explanatory notes. Some of the key measures are considered below.

MTD for income tax

The draft legislation:

• defers the start date of Making Tax Digital (MTD) for income tax for some groups;
• reduces the mandation threshold from £30,000 to £20,000 from April 2028; and
• confirms HMRC’s powers to cancel or reset late submission penalty points and cancel financial penalties.

This is explained in more detail in a separate article.

Reform of IHT

As announced at the Autumn Budget 2024, the draft legislation:

• brings most unused pension funds and death benefits into the scope of IHT from 6 April 2027; and
• makes significant changes to business property relief (BPR) and agricultural property relief (APR), including the introduction of a new £1m allowance for 100% BPR and APR. 

In May 2025, ICAEW responded to a consultation on how the changes to BPR and APR will apply to property settled into trust, warning that the measures could have severe consequences for businesses. The consultation outcome, published alongside the draft legislation, states that the £1m allowance will remain fixed up to and including the 2029/30 tax year, and will then be indexed in line with the consumer price index.

Tax advisers facilitating non-compliance

In March 2025, the government launched a consultation on proposed changes to expand and strengthen HMRC's powers to investigate and sanction tax advisers who facilitate non-compliance. In its response to the consultation, ICAEW said that the government’s plans were poorly targeted and that more should be done to minimise the impact on compliant tax advisers.

The government appears to have taken this feedback on board. In its summary of responses to the earlier consultation, the government says that the draft legislation will “bring into scope only those who deliberately facilitate non-compliance” and does not “target tax advisers who make genuine, one-off, accidental errors or differences of legal interpretation”. A key factor when responding to the consultation on the draft legislation published on Legislation Day is considering whether it delivers on this intention.

The government says that it “remains keen to explore ways to tackle incompetence and unreasonable errors among tax advisers” and would welcome views on how this could be achieved as part of the consultation on the draft legislation.

Tax adviser registration with HMRC

Draft legislation has been published that introduces a legal requirement for tax advisers who interact with HMRC on behalf of clients to register with HMRC and meet minimum standards. The new requirement will apply from 1 April 2026, subject to a transitional period of at least three months.

To apply for registration, the tax adviser must meet three eligibility conditions (A-C), although condition A itself contains eight conditions, supplemented by a list of 11 offences for which there must not be an unspent conviction.

HMRC will provide a digital registration process and a non-digital alternative for those who are digitally excluded. It is not clear if this will be available in time for the April 2026 start date.