Getting Ready for Making Tax Digital

With just 10 weeks or so to go until the new tax year, many businesses are preparing for the changes that Making Tax Digital (MTD) will bring. From April, sole traders and landlords with an income of over £50,000 will need to submit quarterly updates to HMRC.

It is estimated that around 900,000 individuals will be joining in April. If you are affected, this will be a major change and the earlier you can be prepared, the better.

Using approved software

MTD requires the use of software. Whether you are already a ‘digital native’ with your bookkeeping, or have not yet made the jump, it will be vital to make sure that any accounting software you use is HM Revenue & Customs (HMRC) approved for MTD use.

Use of software for keeping your accounting records can have benefits beyond helping you to comply with MTD. For instance, software can help streamline some of your work, make it easier to forecast your cash flow, help inform you in making financial decisions and help to reduce mistakes.

That means that when you are selecting accounting software, it is worth considering some of the other advantages it could give you and your business.

Registering for MTD

Based on your tax return information, HMRC will get in touch with you to let you know that you need to get ready for Making Tax Digital.

However, HMRC will not sign you up automatically. This is something you will need to do, and it is important that you do this in time.

Are there any exemptions?

There are some automatic exemptions from MTD. For instance, if you are submitting a tax return as a trustee or as a personal representative of a taxpayer who has died, there is no need to sign up for MTD. Generally, HMRC will tell you if you are automatically exempt.

In addition to automatic exemptions, there are situations where an exemption can be applied for. So, it pays to check whether your situation might mean you can apply.

What if your income is less than £50,000?

MTD is being given a phased introduction. MTD will become mandatory for sole traders and landlords as follows:

• 6 April 2026 - those with income above £50,000
• 6 April 2027 - those with income above £30,000
• 6 April 2028 - those with income above £20,000

It is possible to voluntarily sign up sooner if you wish.

Does MTD apply to partnerships?

Not yet, however, HMRC have advised that business partnerships will also need to use MTD in the future. The timeline for when this will happen will be set out at a later date.

Would you like help with MTD?

Choosing software can be a bit of a minefield, so if you would like support, we can offer you a tailored recommendation and any training you need. We can also handle your registration with HMRC.

If you would like ongoing help with bookkeeping, filling in the quarterly returns, or you just want us to handle the end-of-year return, please get in touch. We would be happy to help you!