Back in 2015 HMRC announced Making Tax Digital (MTD), and in 2019 MTD for VAT was launched. Although the acronym has become established, the system it planned to institute has been far from established.  In fact, the deadlines have been pushed back on more than one occasion.

The latest update is the announcement that, for self-employed individuals and landlords, MTD for income tax self-assessment (ITSA)will come into effect in April 2026.  And this time HMRC seem to be confident that this will happen without any further delays.

It was expected that the threshold for this requirement would have a higher bar, especially as the VAT bar has increased to £90K per annum.  However, the reverse is actually the case.

Is this you?

Self-employed Individuals and landlords with a total turnover – not profit – of more than £50K will be required to do quarterly reporting.  So, if you’re turning over about £40K a year, but have a couple of rental properties that generate more than £10K in rent per year, that’s you.

Rental income is net – it doesn’t matter how much the mortgage is.  Also overseas rentals will be included, although a separate set of accounts for overseas income will need to be submitted, even though the total income of UK and overseas income is included.

The following year (April 2027) the requirement for quarterly reporting will extend to individuals who turnover more than £30K.

If your income is below £30K, you may not need to worry as a review is planned and it seems unlikely that people turning over less than that, won’t have to comply.

Realistically, the individuals that will be hit the hardest are the trades, especially those people who’ve saved hard and acquired a rental property or two to provide another income stream.

What does it mean for you?

If you only pull your accounts together once a year to submit your income tax self-assessment, this will need to change.  You’ll need to keep track of income and expenses.

This means you will need the right systems to allow you to upload your quarterly report.  The ideal is to have one of the digital accounting systems that will help you to not only keep track of your figures, but also can generate the information that HMRC requires – in the format that is acceptable.

The upside

It’s never a bad idea to have good records.  Not just for required reports, but to help you to see how your business is doing.  While what’s already happened is history, it can influence your decisions about the future of your business.

Doing quarterly submissions will also reduce the stress of trying to do a whole year’s accounts in a single go.  If you get into the habit of entering information, it will actually make everything much easier and let you keep an eye on your income, before a small problem turns into a big one.

If you have an accountant who has to deal with a whole year’s worth of records, they will be able to help you to comply with much less effort – as it will take less of their time and, potentially, cost you less!

If you’d like some more information give us a call on 01992 554444.