Making Tax Digital: Your Questions Answered
Making Tax Digital is one of the most
significant changes to UK tax administration in decades. But whilst it may seem daunting, early preparation and the right support can turn this challenge into a strategic advantage.
T o help you get prepared we’ve Q: What is Making Tax Digital (MTD)? A: Making Tax Digital is HMRC’s flagship initiative to modernise the UK tax system. It requires businesses and individuals to maintain digital records and submit tax returns using compatible software. The aim is to improve accuracy, reduce errors, and make tax administration more efficient. MTD began with VAT and is now expanding to Income Tax Self- Assessment (ITSA). pulled together some of our most frequently asked questions to help you clarify just what Making Tax Digital means for you. Q: Who will be affected by MTD for Income Tax and when? A: MTD for Income Tax will be rolled out in stages:
Qualifying income includes self-employment profits and property rental income , both UK and foreign. Importantly, this is gross income before expenses too, so even if your net profit is below the threshold, you may still be required to comply. Q: What are the key requirements under MTD for Income Tax? A: Those that qualify for MTD must:
Q: What’s the best software to use for MTD? A: You’ll need to use MTD-compatible software that can link directly to HMRC’s systems. Popular options include Dext , Xero , QuickBooks , and FreeAgent , among others. We can help you choose the right solution based on your business size, complexity, and budget. But there’s also a useful software finding tool on the gov.uk website to help you decide. Q: Are there any exemptions from the scheme? A: Yes. You may be exempt if:
1.
Keep digital records using HMRC-approved software.
2.
Submit quarterly updates to HMRC summarising income and expenses.
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You do not have a National Insurance number.
3.
Submit a final declaration at year-end to confirm accuracy and make any adjustments.
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It is not reasonably practicable for you to comply (e.g., due to age, disability, or remote location).
Quarterly updates are due one month after each quarter ends. For example, the first quarter (6 April–5 July) must be submitted by 7 August.
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You are a specific care provider (e.g., foster carers).
From April 2026: Sole traders and landlords with gross income over £50,000 must comply.
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Or your religious beliefs prevent you from using digital tools.
From April 2027: The threshold drops to £30,000.
You can apply directly to HMRC if you believe you are digitally exempt, even if you’ve already signed up for MTD but your circumstances have changed.
From April 2028: It will apply to those earning over £20,000.
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