Making Tax Digital

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Can anyone help to clarify the new requirements HMRC are instigating regarding MTD?

I attending one of the webinars but came away feeling completely confused, incompetent and frustrated.

Thank you!

It should be pointed out that the April 26 start point relates to turnover in the 24/25 tax year.

April 27 start relates to income in the current tax year - 25/26 and so on.

Following with similar confused interest and fear of the ballache

For the current start date of April 2026, the Turnover is self employed income and rental income, which is over £50K solely or combined. Partnerships and Ltd Co's do not come into MTD yet.

If your self employed turnover is over £20K, then you would have to start filing from April 2028.

Once you are in MTD you must remain in it for 3 years even if you go under the threshold again.

I am recommending to all clients that they use a cheap software such as Xero to connect to a bank account that only has business transactions in it to cut down on the work. If you have the right software you can snap your receipts into it.

If you really don't understand it at all then you should get a bookkeeper or accountant to deal with it for you. There aren't any penalties in the first year, but after that there will be 1 point per quarter for late filing and a £200 fine when you reach 4 points.

You only need to do Mtd if your self employed turnover is over £30k.
So if it isn't, don't worry about it until this time next year!

I'm also a tutor with both self employed and PAYE income, but s/e is under £30k and I won't need to worry until the threshold is £20k next April

Yes, landlords have to do it :(

But that's just kicking the can down the road. I want to find out now what I need to do so I'm prepared. Hence starting this thread.

I despise this government and everything they are doing. This included.

This website is brilliant. Lots of helpful guidance with worked examples https://www.litrg.org.uk/making-tax-digital-income-tax

Except it was the Tories that announced this in 2015 so not really this governments idea........

It’s not their idea.

i run a payroll for my company and we had similar quite some time back, real time reporting was brought in and returns went from annually to monthly. The anticipation was the worst thing, once it got started it was fine and actually better in the long run.

@midnightserenadeoh really? I stand corrected! I assumed it was Labour trying to squeeze every penny from landlords!

This will apply to my friend, as her recent 2024/25 self assessment is over the £50,000 threshold

Based on reading up a few weeks ago…..

Her 2025/26 self assessment will be due in 2027 as standard, but she begins MTD quarterly submissions this year for 2026/27, followed by the full self assessment in 2028)
(that means she is looking at sorting out the 25/26 early to get rid of it, or keeping to her normal timetable to concentrate on the MTD)

There have been early voluntary trials of MTD, and this ‘first’ year apparently won’t have late penalties against the quarterly MTD dates - but they must all be submitted before the full self assessment can be submitted - so putting it off will just compress all
of the grief into a limited time

As you are around the £30,000 then unless that includes other things such as PAYE that don’t apply then add one year to the following dates

(simple for me as mine is in the pocket money zone of requiring self assessment but nowhere near any of the planned periods)

https://makingtaxdigital.campaign.gov.uk/?utm_source=google&utm_medium=CPC&utm_campaign=mtd&utm_content=mtd&gclsrc=aw.ds&gad_source=1&gad_campaignid=22261838862&gbraid=0AAAAA9kEhJBSKjlATgI87K0IHTUY3rutW&gclid=Cj0KCQjw9-PNBhDfARIsABHN6-0lX9fkgXNTD4O8oD4z0XzWtu5gY4CqPAT6eOyiXwzdX9GOwCUM29MaAgMXEALw_wcB

there is a wide range of MTD software, which is chargeable or free, may be included with your banking, and can be either linked to your existing accounting or handled on a standalone basis
When we spoke she had not decided on software, but was veering towards dedicated software - the disadvantage being another piece of admin repitition, but the ‘advantage’ of being able to cross check it

Submission dates

MTD 26/27 q1 6 apr-5 July due 7 aug 2026
MTD 26/27 q2 6 July -5 oct due 7 nov 2026
MTD 26/27 q3 6 oct -5 jan due 7 feb 2027
MTD 26/27 q4 6 jan - 5 apr due 7 may 2027

2025/26 self assessment due 31/1/2027
2026/27 self assessment due 31/1/2028

Because they did a survey and effectively asked 'Would you like to know what your tax bill will be earlier so you can save the money/put it aside and not have a surprise when you file your return in January' and the answer was yes - they ommitted to say you'd have to change how your records were kept and make more submissions for this to work.

Well how else could it work?!

Get a free business bank account that comes with free accounting software, we use Mettle/Freeagent.
Couldn’t be easiet, Freeagent links to your HMRC account and your business account - all you have to do then is add your paye income to your tax return, everything else is automatic, assuming expenses come out of the business account.
I do DH’s books, he’s a sole trader, freeagent is really, really easy to work with once it’s set up.
It will take all of 10 minutes every quarter to send in the return.

Thanks. Will have a look at that.

Lots of business bank accounts have, are working on, or soon will announce they'll do MTD for sole traders. Eg Monzo is starting to on board their customers, and their "Lite" business bank account is free. If you don't need to start this April I would wait a few months and see what's available then.

I have already applied for an exemption even though I wouldn't reach the MTD threshold until at least next year. I'm on a freelance contract and my affairs are very simple. I don't even use a spreadsheet as I can't fathom them out. I just sent a letter to the normal HMRC Self Assessment postal address setting out all the problems I have had with software and computers (I managed to keep it all on one side of A4!) and also pointed out that I am in late middle age/early old age. To my surprise, they have granted the exemption. Might be worth a try?

You can also get exempt if your religion prohibits using computers or just make a partnership I also think the £50k turnover will be such a cluster fuck the rest will be kicked into the long grass

I hope so. The whole thing is a mess: it's barely been publicised at all and I only heard about it from a friend last summer! I like to think I keep up with this kind of development but MTD had passed me by entirely. Hopefully like you say, Parsley4321, it'll fail and they'll ditch it. Mind you, Poll Tax still hasn't been reversed after 35 years or however long that's been....

HMRC can barely keep up now I’ve moved to a partnership and see how it goes

Can I ask a potentially stupid question? I have some rental income. I had looked at this a couple of months ago and concluded that it won't affect me for a while because it starts off as £50k turnover (I know that's rental income in total, not deducting any expenses). Then to £30k. Then to £20k.

There is a chance that this year my qualifying rental income could be over £30k. As in my income from April 26 to March 27 could be more than this.

But what I am seeing now is that if the income this year is over £20k we have to use this software right now.

If it's only just been introduced, how can they have reference to £50k then £30k, if that simply relates to past years which will already have been accounted for before the new rules came in?

Is it in effect that from right now we just ignore the £50 and £30k thresholds and just think if it's over £20k we need to do it/get an accountant to sort it?

Or is it that as my turnover in 25/25 tax year was nowhere near £50k and my turnover in 25/26 was less than £30k that I don't need to think about it this year?

I assume that transferring some property to a spouse could take away the issue so long as it drops below the relevant threshold. But I can't work out when the relevant threshold applies to?

The thresholds trigger the requirement in the following year, if you trigger in year then you don’t suddenly need to submit MTD but would need to in the next FY

eg

• £50,000 for the 2024 to 2025 tax year, you will need to use it from 6 April 2026
• £30,000 for the 2025 to 2026 tax year, you will need to use it from 6 April 2027
• £20,000 for the 2026 to 2027 tax year, you will need to use it from 6 April 2028

https://www.gov.uk/guidance/find-out-if-and-when-you-need-to-use-making-tax-digital-for-income-tax

(Assuming that I have read your post correctly)
You did not meet the £30k threshold in 25/26, but may do in 26/27 but would cover the £20k threshold of 26/27
That means that for 27/28 you will need to submit quarterly MTD returns - HMRC will notify you of this from your 26/27 return

Thank you @Tomikka I had been planning on transferring a property to my spouse, which would take the income below £30k.

I had thought I could do that later on, but if I hit more than £20k in this current tax year (26/27) then even if I know my relevant income will definitely be way below the £20k in the 27/28 tax year, I still have to register and do it all online?

Even if for example I knew I was in that tax year getting a lot below £20k?

In which case I guess I need either to transfer now early in this tax year, or just get it sorted online or engage an accountant.

How much are people paying roughly for accountants? I've always just done it myself.

Thanks again for your answer.

Now I’m out of my depth ….. I can make an interpretation ….

https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/if-your-circumstances-change

1)Assuming that you hit the £20k this year triggering MTD, but you change circumstances to below £20k:

For changes in circumstances it usually takes 3 consecutive tax years, therefore you would need to do the submissions

Or if you totally cease all self assessment activity to just PAYE and he takes it on then you may be able to notify HMRC and stop the reporting, but my interpretation is that you would have to do MTD

2). If you make a transfer in year and manage to keep below the £20k threshold then you might be able to avoid MTD ……. But get advice from someone who really knows before you get stuck into effort that doesn’t make things easier or that there become other implications of asset transfer