It’s easy for small businesses to overlook the implications of Making Tax Digital (MTD), especially since it has been delayed a few times over recent years. However, we can confirm that MTD is coming, and the countdown has already begun!
Staying informed about these changes can be challenging, but we are here to support you throughout the process.
The launch date for MTD is set for April 2026, which will affect individuals who are self-employed or landlords with a turnover exceeding £50,000.
From April 2027, those with a turnover above £30,000 will also be required to comply, and by April 2028, the threshold will drop to a turnover of £10,000 or more. This means it will impact nearly everyone.
If you are both a landlord and self-employed, the turnover limits will apply to your combined earnings.
The process of MTD
Starting in April 2026, Making Tax Digital (MTD) for Income Tax and Self-Assessment (ITSA) will be implemented. This means you must submit a summary report of your income and expenses to HM Revenue and Customs (HMRC) every quarter.
You must provide quarterly updates representing the cumulative total of your income and expenses for the entire tax year. This means that if an amendment is necessary, you will not need to resubmit the earlier submissions, which will be a significant relief for many.
There is one final step: a final declaration, which will resemble the current Income Tax Return. In this declaration, you will present your final income position across all sources. You will also be able to make any accounting adjustments which we do for you currently if we are preparing your tax returns.
In addition to submitting quarterly returns, HMRC requires that the data be provided in a digital format. This means we can no longer accept your data in a spreadsheet format and then recreate it before submitting it to HMRC.
You can learn more about what digital records look like in a blog we wrote earlier here.
What does this mean for you?
We understand that transitions like this can feel overwhelming, so we want to reassure you that we are here to support you every step of the way.
One important aspect to consider is the need for organised digital records, and we’ve found that using software can really help with this. We are enthusiastic about our partnership with QuickBooks and are committed to finding the best solutions for you at a price that fits your needs.
In the latter part of this year, we will be hosting a series of webinars and seminars designed to keep you fully informed about the changes and offer you options tailored to your situation.
It’s natural to feel anxious about change, but as your trusted advisor, we have the experience and knowledge to navigate these transitions successfully. We’ve guided many clients through past legislative changes, including the initial phase of MTD for VAT, and we are confident that we can do the same for you. Together, we’ll ensure everything goes smoothly.
If you still have any questions, please call your normal manger and they will be happy to talk you through any concerns.
Are there any exemptions from MTD
Some exemptions from MTD (Making Tax Digital) are available:
- Foster carers have been deemed not to see the benefit of being mandated.
- Those without a National Insurance (NI) Number will also be exempt.
Using HMRC’s digital services without a National Insurance Number can be difficult. However, it’s important to note that this may not be a permanent issue. If you’re currently without an NI Number but expect to obtain one in the future, you’ll still need to comply with Making Tax Digital (MTD) once you have it.
What changes were announced for landlords?
MTD (Making Tax Digital) will pose a challenge for many landlords of jointly owned properties, as they will need to calculate their share of income and expenses every quarter and exchange all transaction details with the co-owner. This will involve significant additional work and collaboration.
HMRC has agreed to simplify the process. Landlords can choose to skip submitting quarterly updates on expenses for jointly owned properties. This means there will be less paperwork throughout the year, and all records will be included in the final declaration.
For landlords, we are introducing working with hammock, a leading MTD software solution for landlords. You won’t have to lift a finger; our team can handle everything if that is what you choose.
This tool will not only ensure your compliance with MTD regulations but also provide you with insights and analysis that you’ve never had before.
What does MTD mean for us as agents
It is common for businesses to have two agents, such as a bookkeeper and an accountant, especially with increased reporting requirements.
Currently, HMRC’s online system allows only one agent to manage a client’s tax affairs for each type of tax. However, with Making Tax Digital (MTD) implementation, this setup may not be sufficient for everyone. Some clients may require one agent to handle quarterly updates, while another agent takes care of year-end and final declarations.
The Government plans to allow multiple agents to work on one client’s MTD requirements, making the process smoother and more flexible. It has committed to developing a solution that works for the taxpayer.
What should you do next to prepare for MTD
- Talk to us. We will be reaching out to all our clients shortly.
- Attend our webinars and seminars to gain further knowledge.
- Read our blogs and posts on social media.
- Ask us questions
Finally …
Let’s use this opportunity to make sure you are one step closer to achieving your goals. We are serious about you and your ambitions
If you are not yet working with us but would like to know more about us, look at how we can help you with your tax. Please visit our website and complete the short form so we know how to help you.
Alternatively, if it is easier for you, email us at enquiries@myersclark.co.uk with your specific questions, and we will reply.
To gain valuable insights on the subject, follow us on LinkedIn and Facebook. We will be sharing a wealth of information as we approach next April. Stay informed and ahead of the curve!