MTD (Making Tax Digital)
MTD stands for “Making Tax Digital” and is a Government initiative, first announced in 2015.
MTD for Income Tax Self Assessment is abbreviated to “MTD ITSA” and the biggest single change in UK tax administration since “Self Assessment” was introduced in 1999.
MTD ITSA goes live from April 2026 and means big changes.
T4 and our clients will be ready for the new regulations before April 2026.
IMPORTANT: MTD ITSA
INTRODUCTION
MTD ITSA goes live from April 2026 and clients will need to be ready for MTD ITSA before April 2026.
MTD ITSA will mean significant changes to how records are kept and how, and when, returns are submitted to HMRC.
It would be extremely unwise to leave being fully ready for MTD ITSA until it goes live in April 2026.
Those that survive and thrive under MTD ITSA will be the ones that have carefully planned and put everything in place before MTD ITSA goes live from April 2026.
WHO IS AFFECTED & WHEN?
Self-employed individuals and Landlords.
When you are affected and required to be MTD ITSA compliant depends on your combined gross business and rental income which is before deducting expenses and is your share of that income e.g. joint rental properties.
Your 2024-25 tax return (6 April 2024 to 5 April 2025) will be the first determining factor.
Those required to be MTD ITSA compliant and when are based on gross incomes for tax years:
From April 2026 if 2024-25 Gross Income Over £50,000
From April 2027 if 2025-26 Gross Income Over £30,000 *
* and you had these incomes before 6 April 2025
Those with gross income over £20,000 will be required to be MTD ITSA compliant at a future, yet to be announced date.
MTD CHALLENGES
Many are going to find MTD ITSA a serious challenge compared to how they have been able to do tax returns and bookkeeping previously.
The serious challenges include:
Time needed to administer MTD ITSA
Increased costs of accounting and software
Tight quarterly deadlines for submission to HMRC
HMRC fines for non compliance
Knowledge & the need for well planned proceedures and systems to cope
MTD ITSA – GOV.UK DETAILS
You can read about the Governments planned MTD introduction here:
 Making Tax Digital for Income Tax – GOV.UK (www.gov.uk)
HMRC have more MTD detail here:
 Using Making Tax Digital for Income Tax – GOV.UK (www.gov.uk)
MTD ITSAÂ – IN BRIEF
A quick brief explanation of what is coming with “MTD ITSA” is:
Keep records in an MTD compliant digital way, using MTD compliant software, e.g. Quickbooks.
Send updates to HMRC every 3 months, within 30 days of each quarter, very tight new deadlines
Confirm end of period statements and submit year end statements
Make a final, annual declaration, by 31 January following end of tax year
PLUS, separate digitally complaint records are required for each business.
NOTE: If you run a business and are also a landlord you will need to be MTD compliant SEPARATELY for EACH business income, expenses and records i.e. separate Quickbooks licence and records for the trading business and the rental lettings “business”.
OUR RECOMMENDED SOLUTION IS QUICKBOOKS ONLINE “PLUS” VERSION (QBO)
T4 can help our clients with:
Significant discounts off the QBO list price, saving software costs,
Carefully planned implementation
Better solutions
We have been keeping a close eye on MTD since it was first proposed and how we can help our clients implemment MTD ITSA successfully.
PRE-MTD SITUATION
WHAT’S NEW UNDER MTD ITSA
However, under MTD ITSA:
a) increased number of returns to HMRC, 4 quarterly interim returns plus a final “confirmation” return,
b) significantly reduced filing deadlines down from 9 months to 30 days for the interim returns,
MTD ITSA is going to pose serious challenge for many as it is a huge change to the way many small businesses keep records and file returns to HMRC.
If you also factor in;
Client holidays
Staff holidays or time off
Potential sick leave or illness for clients or their accountants and staff
Practical, technical, & software issues
HMRC website issues (which are frequent and often poorly resolved)
Other potential pressures on time and resources
All these factors mean that the risks and pressures under MTD are going to increase, significantly.
There will be HMRC PENALTIES or FINES for being late.
YOU NEED TO MAKE SURE YOU ARE READY & AND HAVE ADAPTED BEFORE MTD GOES LIVE
SOME OF THE EFFECTS OF MTD WE ARE SEEING
The accounting sector is changing significantly to cope with the new challenges MTD ITSA will bring.
For example accountants are:
Trimming their client base or services to be able to cope with MTD ITSA
Being more selective about which new clients to take on (those that can adapt and cope)
Increasing fees to reflect the extra work required
Not taking on smaller clients at all
Changing traditional ways of working, and
Some accountants are retiring or exiting the industry before MTD goes live.
These are all indications of how seriously MTD ITSA needs to be taken, and the impact it is going to have.
WHAT ARE T4 DOING
T4 are:
Helping clients implement MTD ITSA using efficient, effective and good software e.g. Quickbooks
Help clients develop good processes and systems to cope with MTD ITSA
Creating new automated accounting & admin processes to reduce time and costs
Training and supporting clients how to cope with MTD ITSA effectively