HM Revenue and Customs (HMRC) is working to enhance compliance and improve efficiency with tax filings by implementing Making Tax Digital (MTD) for Income Tax.
Taxpayers need to get ready for MTD before it becomes mandatory in April 2026 for sole traders and landlords with gross income of £50,000 or more.
With the first major deadline looming, now is the time to get MTD ready.
- Verify your digital record-keeping
All business records must be digitised, ideally using HMRC-compliant software.
It is finally time to retire the paper ledgers and the disparate collection of documents stored on various devices.
All important information should be stored electronically in a secure place.
- Confirm your software compatibility
MTD requires the use of compatible software for both record-keeping and submissions.
Make sure that any software you are considering will satisfy the requirement for MTD.
If you are unable to invest in new software, then you can continue to use Excel spreadsheets, provided you can link them to HMRC’s systems using a bridging solution.
However, many other benefits come with using established cloud-accounting platforms that may be worth your consideration.
- Ensure workflow integration
Every part of your operation is going to need to be checked to ensure that the necessary information is being gathered correctly to make your quarterly MTD filings.
Fragmented workflows introduce the risk of missed invoices, unrecorded expenses, or other issues that could lead to non-compliance.
- Train your team and assign responsibility
Your team, if you have one, need to know how to effectively use the MTD-compliant software so that they do not hinder the filing process.
They should be aware of the responsibilities that are placed upon them in terms of gathering and recording information.
Conducting regular training is important to ensure that staff are equipped to meet the requirements of MTD.
- Test the reporting process
There is still some time before MTD comes into force, so there is no harm in running a few tests and trials now.
As MTD brings with it quarterly filings, practising collating your data every three months instead of leaving it until your annual Self-Assessment tax return.
This will help to expose any issues before you are subject to HMRC’s scrutiny.
Taking action now reduces the risk of late submissions and penalties when the MTD deadline hits next year.
For advice and guidance on preparing for Making Tax Digital for Income Tax, speak to our team today.
