An Introduction to Making Tax Digital (MTD)
It seems that HMRC have been talking about Making Tax Digital for a long time and, in fact, it was ten years ago it was first announced. What followed was a number of delays, but it has been confirmed that this is finally happening!
You may even be reading this blog because HMRC have sent you a letter saying you might be required to register from 6 April 2025. A lot has become clearer with regards to what this will involve, and GLX are here to keep you up to date with any further developments.
So ‘What do you need to do?’ The first thing is to not panic; you may already have systems in place that will be suitable, and even if you do not then we have a year to work out the right solution for you. The important thing is to engage with your accountant and work with them to find the easiest and best solution for you.
If you already have a self-employed business or are a landlord, and are below the VAT threshold, you will be very used to only having to submit a tax return to HMRC once a year, with a January deadline.
Maybe currently you are someone who uses software to quickly and efficiently complete your record keeping in a few minutes on a Friday afternoon before then having the weekend to enjoy family life, or maybe you are the sort of person who just drops off a shoe box full of receipts to your accountant once a year! The great news, in both scenarios, is you are currently keeping records in line with HMRC requirements (and we love working with you equally)!
However, from 6th April 2026 businesses who have combined self-employed and rental income of £50,000 (That is the total amount of receipts, before any expenses; not profit) will have to submit an update of the year to date profits, every quarter, in an electronic format to HMRC. This will need to be made within a month and 7 days of the period end, as well as a final statement by 31 January the year after.
The essential requirement of MTD is that businesses must maintain their records in a digital format. This can include compatible software or spreadsheets. Maintaining records in paper format ceases to meet the legal requirements.
The first year will look a little something like this:
1. Submission 1 – Quarter: 1 April 2026 – 30 June 2026
- Due: 7 August 2026
2. Submission 2 – Quarter: 1 April 2026 – 30 September 2026
- Due: 7 November 2026
3. Submission 3 – Quarter: 1 April 2026 – 31 December 2026
- Due: 7 February 2027
4. Submission 4 – Period: 1 April 2026 – 31 March 2027
- Due: 7 May 2027
5. Final Submission (Year-End Report): 1 April 2026 – 31 March 2027
- Due: 31 January 2028 (along with any tax due)
As you can see you will have this will mean that you have to submit information to HMRC much more regularly. By working with your accountant to ensure you have the right system in place, that works best for you, should minimise the hassle of this and there are a number of benefits to this;
You will have much better year to date figures than just doing it at the end of the year. This means your accountant can project tax liabilities further ahead meaning you never have a nasty shock when January comes round. Secondly, if ever asked to provide estimated figures for financing or other purposes you will have these to hand. Finally, by submitting quarterly you are not creating more work, but splitting it over the year, hopefully meaning less stress overall.
Ultimately, working closely with your accountant we aim to make this transition as smooth as possible.
We will be posting a number of blogs in the following months as the final details are announced to ensure you are kept fully up to speed, and if you are an existing client we will contact you during the preparation of the 24/25 tax return to let you know if you will need to join in April 26 and to get all the building blocks in place to ensure complying with Making Tax Digital is stress-free.
If you have any queries around Making Tax Digital or would like to know more about how GLX can help you, contact us today.