If you work for yourself as a sole trader or earn income from property, the way you report information to HMRC is changing.
HMRC have a new system, which will be rolled out in stages, depending on your qualifying income, and it’s called Making Tax Digital. It requires you to keep digital records and submit quarterly updates to HMRC, followed by an end-of-year final declaration.
Partnerships are currently outside the announced MTD for Income Tax start dates. HMRC has not yet confirmed when the rules will be extended to most partnerships.
Why are HMRC doing this?
Mainly to recover lost income from incorrect self assessment returns. They hope to improve the tax system by making it more efficient, transparent and accurate.
When will I need to start the new MTD process?
The good news is, if your qualifying income is under £20,000 you will continue to carry out your tax returns in the normal way, via a self assessment tax return. There are no changes planned for this bracket at present.
- If your qualifying income during the tax year 2024-2025 was above £50,000, you will need to use the new MTD process from 6 April 2026 onwards.
- If your qualifying income during the tax year 2025-2026 is above £30,000, you will need to use the new MTD process from 6 April 2027 onwards.
- If your qualifying income during the tax year 2026-2027 is above £20,000, the MTD process will start from 6 April 2028 onwards.
What do I need to do to be compliant?
- You will need to start using recognised bookkeeping or accounting software and keep all income and expenditure records digitally. You will need to be organised and have this set up in advance of the relevant dates.
- You will need to make sure you send your quarterly summaries to HMRC directly from your software and on time, to avoid avoid penalties for late submissions.
- Making Tax Digital does not currently change the main Self Assessment payment dates. Most taxpayers will continue to pay tax under the existing Self Assessment timetable.
Which computerised systems integrate with MTD?
There are lots of systems out there that integrate with HMRC’s MTD system, some of them are free. You will find a list at: Making Tax Digital software – what you’ll need for Income Tax
Here are a few I have used for my clients:
- Inuit QuickBooks – Only the paid packages integrate with MTD – for Sole Traders and UK property (I can offer a discount for this package)
- FreeAgent – Free package – for Sole Traders – a nice easy system to use.
- Sage – The paid version – for Sole Traders.
- Xero – The paid version – for Sole Traders, UK property and Foreign property.
What should I do now?
If you’re likely to be affected by Making Tax Digital, it’s worth starting your preparations early.
✅ Check whether your income falls within the relevant MTD thresholds
✅ Move to MTD-compatible bookkeeping software if you haven’t already
✅ Start keeping digital records of income and expenses
✅ Speak to your accountant or bookkeeper about your obligations
✅ Allow plenty of time before your MTD start date to get comfortable with the new process
How we can help
If you are looking for an accountant or bookkeeper, need some advice or training, we can help. Find us at:
www.hislopbusinesssolutions.co.uk
Phone: 07510 914616
Email: michelle@hislopbusinesssolutions.co.uk
We offer a free consultation to discuss how we can best support you.
Find out more information at: https://makingtaxdigital.campaign.gov.uk or speak to us.
