Making Tax Digital (MTD)

It feels like we’ve been talking about Making Tax Digital (MTD) forever. The MTD programme was first announced in 2015 and has been with us for VAT since 2019, but for income tax there’ve been delays and changes in terms of who’ll be required to take part and from when.

Who’ll be affected by MTD was covered in my previous blog, so I won’t cover it again here, but has HMRC cried wolf too many times? I do speak to people who now believe that there’s no point in them taking action as they expect more delays.

However, HMRC are increasing their level of engagement with the accounting profession and, with pilot schemes underway, more details are starting to drip feed out of HMRC as to how MTD ITSA (income tax self-assessment) will work in practice.

The wolf may not quite be at the door yet, but he’s certainly walking down the street. It’s worth remembering that who gets brought into scope in April 2026 will be determined by their income in the 2024/25 tax year, which is already underway. In effect, MTD is already with us.

What more do we know now?

• We already knew that quarterly submission would be required for self-employment or rental income. The default position is that these will end on the 5 July, October, January and April, to align with the tax year.
  
  
• Returns can be filed up to 10 days early and must be filed by a month and two days after period end (i.e. by 7 August, November, February and May). An individual can elect to use calendar months rather than 5th, but this won’t change the filing deadlines, so this could potentially be a way to allow a few extra days to complete your submission.
  
  
• Retailers will also be allowed a concession, whereby their digital records only need to include the total income for each day, rather than having to enter every transaction individually, which would be highly onerous for a cash business.
  
  
• At present, properties need to be separated into four categories; UK property, overseas property, UK Furnished Holiday Lets and Furnished Holiday Lets in the European Economic Area. However, as has been reported, the Furnished Holiday Let regime is set to end before the introduction of MTD ITSA, so the prospect of having to make four separate submissions each quarter shouldn’t come to pass.
  
  
• Submissions will be cumulative which means any errors can be corrected in the following return without the need to re-submit the earlier period.
  
  HMRC are building free software to handle the final declaration at the end of the year. They won’t, however. be providing anything in respect of the quarterly submissions. so some form of software (be it account software or ‘bridging’ software will be needed.)
  
  Need help?
  We’ve teamed up with Hammock to provide software for our landlord clients and can offer discounts over purchasing this direct. Self-employed individuals will need to use other packages, such as QuickBooks or Xero. If you’d like to discuss your needs, please get in touch with your usual Larking Gowen contact. Call 0330 024 0888 or email enquiry@larking-gowen.co.uk.
  
  Chris Bale