Draft legislation published for the Finance Bill 2025/26

On 21 July 2025 (referred to as L-day), HMRC published draft legislation that will be included in the next Finance Bill due to be published in late 2025. The draft legislation runs to 210 pages and consultation on the draft clauses is open until 15 September 2025. The draft clauses cover a number of important and potentially controversial topics. Particular areas of concern focus on measures that could directly affect tax agents, namely the new agent registration service, new rules impacting on agents who facilitate non-compliance and changes to the rules applying to promoters of tax avoidance schemes.

As drafted, many of the measures appear too widely targeted and could result, for example, in agents inadvertently facing criminal sanctions even in straightforward tax planning situations. We are currently considering all of these rules and convening special committee meetings to discuss them. We will also be engaging closely with HMRC. If you have any comments on these or other measures in the Finance Bill, please contact Lindsey Wicks.

To learn more, and to access the draft legislation, see our article Have your say on draft Finance Bill legislation.

HMRC’s annual report and accounts and transformation roadmap

HMRC published a collection of reports and documents on 17 July 2025, including its annual report and accounts, which analyses its performance in 2024/25 together with how it performed against its charter standards. This was followed, on 21 July, by the publication of HMRC’s transformation roadmap, setting out the 50 IT projects, services and measures that it says will modernise the UK’s tax and customs systems and make it easier for taxpayers and agents to interact with HMRC.

The accounts and charter report show that HMRC continues to underperform, with key targets missed and delays increasing for clearing correspondence. Of the six targets, only compliance yield was met for 2024/25. In respect of speed of answering the telephone, in May 2024 HMRC was given a further £51m with the aim of restoring the service level to 85% of calls answered rather than the 66% achieved in the year to March 2024. HMRC always said that it would take time to improve performance but that it should be met in the final quarter of 2024/25. In the event, the final quarter’s performance was only 75% and the performance for the year was 71.5%.

One improvement recorded was the length of time taxpayers have to wait before their calls are answered, which for 2024/25 was 19 minutes, down from 23 minutes in 2023/24 and showing that the extra investment has had some effect, although not as much as we might have expected. In terms of clearing post, the position was little changed from the previous year and remains below the stated targets. The post position reflects feedback from ICAEW members, who continue to report delays in processing and especially in receiving tax repayments.

Our article, HMRC continues to miss performance targets, looks at the data in more detail and provides links to HMRC’s report and accounts. For a summary of the announcements made in HMRC’s transformation roadmap, see our article HMRC promises new digital solutions for taxpayers and agents

HMRC performance

On 3 July, Lindsey Wicks and Ed Saltmarsh met with HM Treasury alongside representatives from the Chartered Institute of Taxation (CIOT) to discuss the joint ICAEW/CIOT report Tackling HMRC’s customer service challenge, published in December 2024. We were pleased that HM Treasury had considered our project in detail, and we had a collaborative discussion around our recommendations to improve customer service, how to improve existing digital services and how to develop and introduce new digital services effectively. HM Treasury is keen to continue discussions with ICAEW and CIOT around improving customer service in the future, and we look forward to working with them collaboratively.

MTD income tax

Included in the L-day material was the draft legislation implementing Making Tax Digital (MTD) for income tax. Helpfully, HMRC published a consolidated version of the revised MTD legislation. The draft legislation confirmed the reduction in the MTD income tax threshold to £20,000 in April 2028.

Although ICAEW remains opposed to quarterly reporting, with less than eight months to go before implementation in April 2026 members need to consider how to help their clients make the transition to MTD income tax. If you don’t know the best place to start, the faculty staff have been busy providing some material to help you, which can be accessed through the Tax Faculty’s MTD hub page. These resources include a two-hour webinar published on 2 June 2025 designed to give practitioners a greater understanding of the MTD rules and a Tax in Practice webinar on 1 July 2025 which gave the opportunity to address some of the questions that have been raised by members. The faculty has now published TAXguide 04/25, which is a comprehensive set of FAQs based on the various questions raised on the webinars.

Meanwhile, we continue to engage closely with HMRC on technical and practical aspects of MTD that need to be resolved or improved, so please keep an eye on our weekly news service for further updates. Many thanks to Caroline Miskin and Lindsey Wicks for all their work on MTD.

Professional standards and regulation

The professional bodies have now agreed in principle the proposed changes to Professional Conduct in Relation to Taxation (PCRT) to reflect the changes made by the IESBA code on tax planning and related services. The next step is for the seven professional bodies that comprise the PCRT group to complete their formal approval processes, which should be finalised by the end of August with a proposed adoption date of late September 2025. The seven PCRT bodies also continue to work on revising the existing topical guidance Helpsheet for R&D and the production of two new topical guidance helpsheets on MTD income tax and AI. We will be publishing more on these in due course.

Although HMRC appears to have moved away from measures to regulate the tax profession, other legislative proposals could be seen to be ‘regulation by the back door’, potentially increasing costs and admin burdens on all agents. As mentioned above, HMRC has published draft legislation for agent registration, tax advisers facilitating non-compliance and promoters, which taken together could have a significant impact on all agents. We will be engaging with HMRC over the summer to try and address some of the more problematic aspects of these proposals.

Representational work

During the month we submitted a number of consultation responses, which are listed below. These included a consultation on proposals for improving HMRC’s approach to dispute resolution where we were broadly in favour of the proposed improvements. However, we concluded that there is insufficient justification for charging taxpayers to enter into alternative dispute resolution except in very limited circumstances.

Meetings with HMRC

During the month we attended a number of meetings with HMRC, some in conjunction with other representative bodies. These included: the MTD external readiness forum; the agent digital design advisory group; the VAT digitalisation workshop; the promoting channel shift for income tax services expert panel; a regular catch-up meeting with HMRC’s intermediaries team; and a meeting with HMRC’s CEO John-Paul Marks where we discussed the upcoming HMRC stakeholder day on 16 September and how we might assist in developing the topics for discussion.

Tax Faculty and other meetings

Meetings held during the month included: the tax faculty board; the tax policy and reputation committee; the practitioner tax committee; and the VAT and duties committee. We also attended a meeting of ICAEW’s charity committee where we shared information on tax developments including the consultation on the VAT treatment of donations of goods by businesses to charities. It was agreed to establish a more regular dialogue between the charity committee and the tax faculty in the future.

Representations and TAXguides

We submitted the following representations:

• ICAEW Representation 50/25: The Tax Administration Framework Review – Improving HMRC’s approach to dispute resolution
• ICAEW Representation 51/25: Draft legislation: carbon border adjustment mechanism
• ICAEW Representation 52/25: Reform of transfer pricing, PE and DPT consultation
• ICAEW Representation 53/25: Transfer pricing scope and documentation
• ICAEW Representation 55/25: VAT Treatment of Business Donations of Goods to Charity
• ICAEW Representation 56/25: Strengthening the Soft Drinks Industry Levy
• ICAEW Representation 57/25: Consultation on reform of Landfill Tax

We published:

• TAXguide 04/25: Making Tax Digital for income tax – questions from 2025 webinars

Faculty webinars, events and podcasts

Our monthly podcast series, The Tax Track, continues to gather new listeners and get good feedback and engagement. In the latest episode, I joined Lindsey Wicks, Senior Technical Manager, Tax Policy, and Stephen Relf, Technical Manager, to discuss many of the recent developments summarised above, including the publication of HMRC’s accounts and report for 2024/25, its transformation roadmap and draft legislation for Finance Bill 2025/26.

Alison Ring retires

We are sorry to report that Alison Ring, Director of Public Sector and Taxation, retired on 31 July 2025. Alison joined ICAEW after a successful career at HMRC, becoming HMRC’s advisory accountant. Her deep knowledge of the public sector and experience of working at HMRC in a technical accounting role were invaluable and she will be much missed. We wish her all the best on her retirement.