Delays to Making Tax Digital are expected to cost taxpayers one-off transitional costs of £1.5 billion, HMRC reported in its annual accounts.

HMRC said the extension of MTD would cost the 4.2 million businesses and landlords who file self-assessment tax returns a transitional cost of £1.38bn, on top of an administrative cost of £152m a year.

The 1.1m UK VAT taxpayers will face a one-off transitional cost of £173m, HMRC added.

The Government recently delayed its Making Tax Digital for income tax self-assessment (MTD ITSA) programme to 6 April 2024 to give individuals and businesses more time to prepare after the challenges caused by the pandemic.

The extra costs are on top of the £528m the programme will cost businesses between 2021/22 and 2025/26 according to HMRC forecasts.

The report also revealed that the MTD programme had underperformed, collecting £215m in 2020/21, 45% less than forecast, mainly because of the effects of COVID-19.

However, HMRC now estimates MTD will bring in £2.9bn by 2027/28.

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