What Matters Now: Making Tax Digital for Income Tax

What Actually Matters Now (and What Can Wait)

Making Tax Digital for Income Tax (MTD) is now live for sole traders and landlords with gross qualifying income exceeding £50,000. Having previously covered what MTD is and who it impacts, we now turn to what is likely less clear for those affected – how to approach the first year of MTD sensibly. The first year of Making Tax Digital is about getting established, not getting everything perfect.

What Matters Now

• Be clear whether you are affected by MTD:
  • £50k gross combined turnover from all sole trader and rental activities
  • Exemptions do apply, see our guidance here to confirm if you are affected
• Ensure you are registered for MTD if affected
  • Our guide gives further details on this and provides the link to complete this
• Choose a record‑keeping approach that fits real life:
  • Software-based approach (such as Xero or FreeAgent) to utilise automation features and access via both mobile and computer
  • Spreadsheets for a traditional approach albeit with the added step of uploading to “bridging” software
• Establish a routine/solution that fits your capacity and ability to comply with regulations:
  • Whitings can assist with the entire process, support with submissions or guide you on getting your own solution set up

What Can Wait

Whilst it is important to get your MTD setup established and settle into a routine, there are a few points that you can afford less focus on in this first 12-month period:

• Record keeping doesn’t need to be perfect, if minor errors arise then this is acceptable.
  • HMRC allow for corrections to be included on later submissions within the same tax year.
• Final tax year figures are still dealt with through the normal year‑end process.
  • You are not required to complete four tax returns a year, despite this being a common misunderstanding.
• Quarterly updates are not tax calculations, no tax is payable until the usual 31st January deadline.
  • You may find that if software is adopted though that you are able to view a tax estimate based on submitted figures.

What Happens If You Do Nothing?

During the 26/27 tax year, HMRC will not impose penalties for late filing of quarterly returns. This will change for the 27/28 tax year onwards though. Therefore, the main concern during the next 12 months is ensuring that you understand the new filing requirements and establishing a solution that works around your schedule now rather than trying to catch up later.

Act Now & Get Ahead

Our guide on MTD expands further on the above points and can be downloaded here.

If you want reassurance that you’re approaching this sensibly or need further guidance, please speak to your Whitings LLP contact or your local Whitings LLP office for more information on how we can help.

Disclaimer - All information in this post was correct at time of writing.