The government’s Making Tax Digital for Income Tax (MTD for IT) initiative is expanding, affecting smaller businesses sooner than expected. If you’re self-employed or a landlord, these changes could impact how you manage your tax obligations. Here’s what you need to know and how to prepare.
What is MTD for IT?
MTD for IT is a government initiative aimed at digitizing tax reporting. It requires self-employed individuals and landlords earning above a certain threshold to maintain digital records and submit quarterly tax updates to HM Revenue and Customs (HMRC) using MTD-compatible software. This move is designed to make tax reporting more efficient, accurate, and streamlined.
Who Does MTD for IT Apply To?
MTD for IT will be implemented in phases, impacting different income groups over the next few years:
- From 6 April 2026: Sole traders and landlords with income over £50,000 in the 2024/25 tax year must comply.
- From 6 April 2027: The threshold lowers to £30,000, affecting those earning above this in 2025/26.
- From 6 April 2028: The threshold drops further to £20,000, meaning even smaller businesses and landlords must comply.
Changes to Tax Return Submissions
If you fall under MTD for IT, you’ll also be required to submit your annual tax return using MTD-compatible software. Unlike the current system, HMRC’s free online service will no longer be an option for submitting returns.
How to Prepare for MTD for IT
Transitioning to MTD for IT may require adjustments to how you manage your financial records. Here’s how you can get ready:
- Start Using Digital Accounting Software: If you haven’t already, now is the time to switch to MTD-compatible software.
- Keep Digital Records: Ensure all income and expenses are recorded digitally to meet HMRC requirements.
- Seek Expert Advice: If you’re unsure about the transition, professional guidance can help ease the process.
Need Help?
We understand that these changes might feel overwhelming. If you need assistance with software selection, training, or ensuring compliance, we’re here to help.
Get in touch today to make the switch to MTD for IT as smooth as possible 01772 204102 or via prosper@sbca.co.uk
Stay ahead of the changes and make tax digital with confidence!