With just 8 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. We can provide Xero licences (MTD compatible software we consider meets the majority of our clients’ requirements), set up support and training. Also, landlords can benefit from a property chart of accounts so please do speak with your usual contact at Peplows before obtaining the software.
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.
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.
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.
Help with MTD?
Please do speak with your usual contact at Peplows before the end of February 2026 if you know you are going to be impacted by MTD and have yet to make the necessary preparations.