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With over five decades’ experience serving a diverse range of clients in the South West, we possess an unbeatable depth of knowledge across a wide range of industry sectors.
Our specialist partners and teams can provide expert advice on everything from farming and agriculture, to military tax allowances. We’re here to help you make the most of your planning opportunities so that you can grow with confidence.
Making Tax Digital
Making Tax Digital
From April 2022, all VAT registered businesses had to comply with Making Tax Digital (MTD) for VAT regulations.
From April 2026, self-employed individuals, sole traders and landlords with a turnover greater than £50,000 will need to comply with MTD for Income Tax.
For turnover greater than £30,000 and greater than £20,000, rules for MTD for Income Tax will come in from April 2027 and 2028 respectively.
What is Making Tax Digital (for Income Tax)?
MTD is part of the governments ambition to become ‘one of the most digitally advanced tax systems in the world.’ Their long-term aim is focused on improving collection of tax, enhancing their relationships with taxpayers, and making better use of their resources to reduce errors and non-compliance.
The MTD for Income Tax rules require you to do the following via MTD compatible software:
Create and store digital records of your self-employment and/or rental income and expenditure
Send quarterly updates to HMRC
Send your tax return, or fifth submission
Can you be exempt from MTD?
Yes, there are automatic exemptions based on industry-specific parameters, and others that need to be applied for, for example 'digital exclusion'. HMRC will assess each request for exemption on a case by case basis. If you are exempt for VAT, you will still need to notify HMRC that you'd like the exemption to carry through for Income Tax. You can find more information on exemption here.
Making Tax Digital compatible software
If your turnover meets the threshold, you will be required to record and then submit quarterly updates, as well as your annual tax return or fifth submission. Cloud-based accounting software, or bridging software for Excel users is required.
Our experienced team can guide you through the process of digitalising your records with many software providers including Sage, QuickBooks, Xero, Dext and FreeAgent.
For more information on MTD compatible software, please visit the HMRC website here.
What's involved with quarterly submissions to HMRC?
How many submissions do you need to make?
You need to make one submission per qualifying source of income, per quarter.
For example, if you're a sole trade farmer with a sole trade yoga business and a property letting, that's three submissions each quarter. If you have multiple UK properties in your own name, that's only one submission per quarter. If you have properties abroad, it's one submission per jurisdiction.
What do quarterly submissions include?
Quarterly submissions summarise the total income and expenditure for each period, although the individual transactions need to be recorded within the software.
For rentals, any finance costs such as mortgage interest must be shown separately. Joint property owners do have a concession available to only file income figures on quarterly reports.
Your practical next steps
Understand the deadlines you need to meet and make sure to register for MTD if applicable from April 2026.
Identify if you will submit the quarterly statements to HMRC, or if you'd rather a professional adviser submitted on your behalf. If submitting yourself, you'll need to decide which software suits your needs best, or we can help you make the choice.
Ensure income and expenses for each trade/source of qualifying income go through a dedicated bank account
Keep sufficient records of expenses and any loan or mortgage statements
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