1. What is MTD IT?
MTD IT (Making Tax Digital for Income Tax) is part of HMRC’s initiative to modernise the tax system. It requires self-employed individuals (Sole Traders) and landlords to keep digital records of their income and expenses and submit quarterly updates to HMRC using MTD-compatible software.
2. Who does MTD IT apply to?
MTD IT will apply to self-employed individuals and landlords with an annual business or property income as follows:
Exceeding £50,000, starting from April 2026.
Exceeding £30,000, starting from April 2027.
Exceeding £20,000, starting from April 2028.
3. What records do I need to keep digitally?
You’ll need to maintain digital records of:
Income
Expenses
Bank transactions related to your business or property
These records must be stored in MTD-compatible software and submitted to HMRC via quarterly updates.
4. How often do I need to report under MTD IT?
You’ll need to submit:
1. Four quarterly updates summarising your income and expenses throughout the year. The periods will be cumulative, so updates will be due for the following periods each tax year:
April to June (submission due by 7 August)
April to September (submission due by 7 November)
April to December (submission due by 7 February)
April to March (submission due by 7 May)
Each submission effectively supersedes the previous one.
2. A Final Declaration (Self-Assessment Tax Return) to declare all your income and confirm your tax liability.
5. What software do I need for MTD IT?
You’ll need MTD-compatible software to manage your records and submit updates. Popular options include:
Xero
FreeAgent
We can help you choose the best software for your needs and set it up for you.
6. What happens if I don’t comply with MTD IT?
Failure to comply with MTD IT requirements may result in penalties from HMRC. These could include fines for late submissions or non-compliance with digital record-keeping rules.
7. Do I still need to file a Self-Assessment tax return?
No, MTD IT replaces the traditional annual Self-Assessment tax return. Instead, you’ll submit quarterly updates and a Final Declaration through your MTD-compatible software.
8. What should I do now to prepare for MTD IT?
Determine when MTD IT will apply to you based on your income.
Choose and set up MTD-compatible software.
Organize your records to ensure accuracy.
Seek professional advice to streamline the transition.
9. How can Pink Lily Accounting Solutions help me with MTD IT?
We provide:
Expert advice tailored to your situation.
Setup and training for MTD-compatible software.
Assistance with quarterly updates and year-end submissions.
Ongoing support to ensure compliance and peace of mind.
Still Have Questions? We’re Here to Help!
At Pink Lily Accounting Solutions, we specialise in helping self-employed individuals prepare for MTD IT. Whether you need help setting up software or understanding your obligations, we’re just a call away.
E-mail us now on karen@pinklilyaccounting.co.uk to see how you can work with us.
Building a successful future, together.