Making Tax Digital (MTD)
This is a government initiative to digitalise the UK tax system. This was due to come into effect in April 24, however, the deadline has now been extended to April 2026 and the threshold increased to £50,000.
If you were excited about going digital and would still like to move your records to an online system, get in touch. We have been trialing some exciting new software to make this step easier for small businesses.
Making Tax Digital (MTD) is not just about VAT, but also Income and Corporation Tax and will be introduced in stages, as law, by HMRC over the next few years.
The VAT threshold is a turnover of £90,000 or more and registered businesses are already required to be MTD compliant by keeping digital records and using software to submit returns to HMRC.
From 6 April 2026 MTD is being extended to include self-employed business owners and landlords, with income of over £50,000 per year. Those with income of between 30,000 and 50,000 will need to do this form April 2027. This initiative is called ITSA (Income Tax for Self Assessment), and anyone who falls into this category will need to submit returns digitally.
What we know about ITSA:-
Keeping digital records using software
Once you have determined that you have qualifying income over the £50,000 threshold, The next step is to choose compatible software to keep your digital records on. This can be a bit of a minefield as there are so many to choose from. To see HMRC’s list of accredited software click here. They range from very simple to extremely complicated and it is worth considering how and who is going to be doing the bookkeeping and the time available to learn how to use the software, keep records up to date and file the submissions.
Software
It’s about what works for you and how you like to work. We use a variety of software packages, but our software of choice is Xero. We are Xero Gold Accredited Partners, and as such, have access to packages which are not always advertised online.
Depending on the number and type of business transactions, the way you like to work, and what your priorities are, we can find the most suitable and cost-effective software to suit your needs and keep you compliant. We have completed extensive research into a variety of available options including some excellent non-Xero products that we would be happy to discuss with you.
ITSA Deadlines
All business income and expenses should be recorded digitally as close to the date of the transaction as possible, and before the quarterly update submission deadline for the period. The submission is then made, bearing in mind the strict deadlines that HMRC have laid down.
Failure to submit on time and digitally, is likely to incur penalty charges, which will be awarded on a points system and will apply each time a submission deadline is missed. If you reach a penalty threshold, you’ll be subject to a £200 fine. Once you reach that threshold, every following failure to make a submission/payment on time will also incur a fine.
Here at TPT we know how difficult it can be for business owners to keep up with all the new rulings, and the work that is involved in complying. We can help you, either by taking the full load from you and supporting you while you get to grips with the new systems, or just as a point of contact to talk through your concerns.
Get in touch today and start your digital journey – it really isn’t as scary as you think!
