From 6 April sole traders and landlords with income over £50,000 must start reporting their income digitally every quarter. Miss a deadline, and HMRC penalties can follow.
The good news: acting now gives you time to get set up properly, choose the right software, and stay ahead of the new rules before they start costing you time, money and stress. So, does this really affect you and if so, what should you do?
Do you meet the criteria?
If you filed a tax return for the 2024/2025 tax year and are a sole trade business or landlord who received more than £50,000 of qualifying income per annum, you meet the criteria.
What is qualifying income?
This is the income received before expenses, and as both self-employment and rental are included, it is the combination of both sources that determine inclusion under the new rules.
What is required under the new rules?
Under MTD you no longer file a Self-Assessment Tax Return. All self-employed and rental income must be recorded digitally using HMRC recognised software and submitted to HMRC quarterly.
The deadline for submission of each return is one month and one week following the end of the quarter. Therefore, the first return due for submission will cover the quarter ending 30 June 2026 and is due for submission by 7 August 2026.
What do you need to do now?
Registering with HMRC for MTD includes a few key steps and you will also need to set up compatible software if you aren’t already using something.
All of your business and/or rental transactions will need to be recorded digitally, so the more you have to process, the sooner you should get started to avoid a last minute rush.
What software is there to help you?
Several cloud-based software packages have been working closely with HMRC to ensure they are ready for the new regime. Your choice may depend on the level of complexity or number of transactions you handle. As a Xero Gold Partner, we are here to support you and guide you through the set up process.
What happens if it goes wrong?
There are penalties that will be imposed by HMRC for non-submission/compliance with the new rules. However, the quarterly returns are cumulative throughout the tax year so if you happen to make a mistake in one quarter it can be corrected in the next.
You will also need to submit a final annual declaration, much like the Self-Assessment Tax Return you have filed before. This is your opportunity to confirm all figures are accurate and includes income not reported in the quarterly returns.
Making Tax Digital is here: the sooner you understand whether it applies to you, get registered, and set up your digital records, the smoother your transition will be. Start now, reduce the risk of penalties and errors, stay organised, reduce stress and stay ahead of the curve.
Contact Nikki Cairns for more information or by emailing nicola.cairns@randall-payne.co.uk or calling 01242 776000.