Making Tax Digital for Income Tax (MTD IT) is coming, and represents a significant shift in how businesses and landlords will manage their tax compliance.
What is MTD IT?
A government initiative to digitise the tax system for self-employed individuals, sole traders and landlords. The new system requires maintaining digital records and submitting quarterly updates to HMRC through compatible software, moving away from the traditional annual reporting cycle.
What is a qualifying income for MTD IT?
The implementation follows a phased approach based on qualifying income thresholds:
- Over £50,000 (by April 2026)
- Over £30,000 (by April 2027)
- Over £20,000 (by April 2028)
Who is exempt from MTD IT?
Businesses that may be exempt from MTD IT include those that cannot reasonably or practically use digital tools to keep records or submit information. This could apply if:
- You are of advanced age
- You have a disability
- Your business is located in a remote area with limited digital access
- You object to using computers for religious reasons
- Any other valid reason that makes it unreasonable or impractical to use digital systems.
If you think your business qualifies for an exemption, you’ll need to apply directly to HMRC, and each exemption request will be considered on an individual basis.
How can I prepare for MTD IT?
- Set up digital record-keeping systems to ensure your accounting and bookkeeping software is compatible with MTD IT, allowing for quarterly reporting and direct submission to HMRC
- Familiarise yourself with new reporting requirements to understand how to submit quarterly updates to HMRC and track your tax liabilities in real-time
- Train your team if you have staff managing financial records to ensure they are equipped with the necessary skills and knowledge to handle digital records and reporting
What are the benefits of this new system?
Beyond compliance, the quarterly reporting structure offers enhanced financial visibility throughout the year and helps distribute the administrative burden more evenly, rather than concentrating it during the traditional year-end filing period.
What if I don’t comply?
Non-compliance with MTD IT requirements could lead to penalties from HMRC, so it’s crucial to start preparing well in advance.
How we can help
We’re here to make the transition to MTD IT as smooth as possible. We can assess your MTD IT requirements, recommend the right software, handle your submissions and keep you updated on any changes to ensure ongoing compliance.
Want to learn more? Get in touch today on 01942 816512 or email:
Chris Barlow, Tax Manager: [email protected]
