Making Tax Digital (MTD) is changing the way individuals and businesses manage their tax affairs, and while many taxpayers have already begun the transition, there are still significant deadlines ahead.
At Elsby & Co, we’ve already helped many sole traders and landlords prepare for the first phase of Making Tax Digital. Now, we’re encouraging those who will be affected in the coming years to start planning early.
What is Making Tax Digital?
Making Tax Digital is a government initiative designed to modernise the UK’s tax system. It requires taxpayers to:
- Keep digital records of income and expenses
- Use HMRC-approved software
- Submit quarterly updates to HMRC electronically
The aim is to make tax reporting more efficient, accurate and up to date.
Who Is Affected?
The first mandatory Making Tax Digital quarterly reporting requirements are already in place for sole traders and landlords with annual income exceeding £50,000.
The rules will expand further over the next few years:
- From April 2027, individuals with qualifying income over £30,000 will be brought into the regime.
- From April 2028, the threshold is due to reduce further to £20,000.
If you fall into either of these categories, now is the time to start preparing.
Why Early Preparation Matters
Many business owners assume they can wait until the last minute, but becoming comfortable with new systems takes time.
Carina Benzie, Associate Partner at Elsby & Co, said:
“We helped businesses affected by the first deadline select and implement suitable Making Tax Digital-compatible software, as well as providing training so they could use their systems confidently and efficiently.
We’re now encouraging those who will be affected in the coming years to start thinking about their software choices sooner rather than later. If you’re planning to manage the process yourself, it’s important to allow time to become familiar with the software and ensure it meets HMRC’s requirements.”
Practical Steps You Can Take Now
There are several actions businesses and landlords can consider before joining Making Tax Digital:
Review Your Software
Check whether your current bookkeeping software is compatible with Making Tax Digital requirements. If not, begin researching alternatives and considering the transition process.
Separate Income Streams
Maintaining clear records and separating different sources of income can make quarterly reporting significantly easier once the rules apply to you.
Align Reporting Requirements
If you are voluntarily VAT registered, it may be worth considering whether your reporting deadlines can be aligned. This can help reduce duplication of work and create a more streamlined process throughout the year.
How Elsby & Co Can Help
For some business owners, managing the transition independently may be the right approach. For others, having professional support can provide reassurance and save valuable time.
Our team can help with:
- Selecting suitable accounting software
- Software setup and implementation
- Training for business owners and staff
- Making Tax Digital registration
- Ongoing bookkeeping and compliance support
- Quarterly submissions to HMRC
Most importantly, we can help ensure submissions are accurate and made on time, giving you greater confidence and peace of mind.
Beyond Compliance
While Making Tax Digital is often viewed as another compliance requirement, the move to more regular reporting can also offer valuable business insights.
Having up-to-date financial information available throughout the year can support:
- Better cash flow management
- More accurate forecasting
- Improved business decision-making
- Stronger investment and growth planning
Don’t Forget Your Tax Return
Although quarterly updates are now part of the Making Tax Digital process, they do not replace your annual Self Assessment tax return.
Individuals will still need to submit their tax return and pay any tax owed by the usual deadline of 31 January.
Need Help Preparing for Making Tax Digital?
If you’d like guidance on choosing software, registering for Making Tax Digital, or managing your ongoing reporting requirements, our team is here to help.
Contact Elsby & Co on 0330 053 9189 or email help@elsbyandco.co.uk to discuss how we can support you.
This article is an abridged version of an article originally published in All Things Business.