Making Tax Digital (MTD) is now live, but given the low numbers registered with HMRC, many sole traders and landlords affected are still looking at how to comply and keep the administrative burden to a minimum.
Low sign-up
At the start of the tax year, nearly 80% of those required to register for MTD had not done so. The problem is that many do not see any upside to keeping digital records and having to report figures to HMRC quarterly:
A number of individuals will find getting records together for the annual self-assessment tax return difficult enough, and will not relish complying with tight quarterly reporting deadlines.
Because the MTD compliance threshold is based on income, there will be some who have to comply but will not even have a tax liability. They will almost certainly not want to incur additional agent fees for MTD compliance.
With the first quarterly update due on 7 August, now is the time to get organised.
Software
HMRC has created a software finder tool to direct taxpayers towards suitable software. However, several of the available options are still at the development stage.
Software that imports information directly from the taxpayer’s bank account may be the perfect solution for many sole traders and landlords, but not for those who are putting their business and/or letting income and expenditure through their personal bank account.
The start point for finding software that works with MTD for income tax can be found here.
Getting help from an accountant
Meeting the demands of MTD can be time-consuming and technically challenging, but hiring an accountant like TN Accountancy ensures your records are compliant, accurate, and submitted on time.
Exit options
The £50,000 MTD threshold from 6 April 2026 is based on income for 2024/25. There will be some individuals whose income has since fallen to below £50,000, and HMRC has now clarified when it is possible to apply to opt out of MTD.
Unfortunately, opting out is only possible where all sources of qualifying income have ceased; not the case if, for example, self-employment ceases, but there is still property income. Opting out of MTD can be done via HMRC’s webchat, by telephone or by writing to HMRC.
Contact us
Please contact us to find out how the above applies in your circumstances and how we can help you.
Please note that the above is for general information only and does not constitute financial or tax advice. You should not rely on this information to make or refrain from making any decisions. You should always obtain independent professional advice in respect of your own situation.
