Making Tax Digital for Income Tax (MTD for IT) represents one of the biggest changes to the UK tax system in recent years. If you're a business owner, self-employed individual, or landlord, here's everything you need to know about this important transition.

What is MTD for IT?

Making Tax Digital for Income Tax is HMRC's initiative to digitalise the UK tax system, making it more efficient, effective, and easier for taxpayers to get their tax right. It's part of the government's wider digital transformation strategy.

Key Deadlines You Need to Know

• From April 6, 2026: Mandatory for self-employed individuals and landlords with annual business or property income over £50,000 (this figure is based on your income for the tax year 2024/2025) 

• From April 6, 2027: Extended to those with annual business or property income over £30,000, based on the total income from the tax year 2025/2026. To be clear, this is based on self-employed income, not company income.

• Future dates will be announced for businesses with lower income thresholds

What Does Being Compliant Mean?

To be MTD for IT compliant, you'll need to:

1. Keep digital records of your business income and expenses

2. Use MTD-compatible software for your record-keeping

3. Submit quarterly updates to HMRC. The deadline will be 1 month after quarter end and there will be penalties issued by HMRC for missed deadlines.

4. Submit an End of Period Statement (EOPS) for each income source

5. File a Final Declaration to replace the current self-assessment tax return

Steps to Take Now

1. Check if you'll be affected by the initial rollout

2. Review your current record-keeping methods

3. Choose and implement MTD-compatible software

4. Start digital record-keeping well before your mandatory start date

5. Consider working with a qualified bookkeeper to ensure compliance

Benefits of MTD for IT

While change can seem daunting, MTD for IT brings several advantages:

• Real-time view of your tax position

• Reduced risk of errors through digital record-keeping

• Better financial awareness and business insights

• More efficient tax management

• Less likelihood of costly mistakes

• Improved cash flow management through quarterly updates

What This Means for Your Business

The transition to MTD for IT means:

• More regular engagement with your business finances

• Better financial planning opportunities

• Enhanced accuracy in tax reporting

• Potential for improved business decisions through real-time data

• Reduced year-end tax burden through quarterly submissions

How to Prepare

1. Start Early: Don't wait until the deadline approaches

2. Review Software Options: Ensure your chosen software is MTD-compatible - if you ask for our support, we will have this covered. Certain software providers are running pilot schemes alongside HMRC for 2025/26. If this interests you, then get in touch, and we can see if you qualify.

3. Train Staff: Ensure relevant team members understand the new requirements

4. Seek Professional Help: Consider working with a qualified bookkeeper or accountant

5. Update Your Processes: Establish new routines for regular digital record-keeping

6. HMRC will be writing to individuals that they believe will be mandated.

The Role of Your Bookkeeper

At Bluebells Bookkeeping, we will:

• Help you put appropriate software in place

• Set up digital systems

• Train you on new processes

• Ensure compliance with MTD requirements

• Handle quarterly submissions

• Provide ongoing support and advice

Next Steps

While 2026 might seem far away, preparing early will make the transition smoother. We recommend:

1. Reviewing your current accounting processes

2. Discussing MTD requirements with your bookkeeper

3. Planning your transition timeline

4. Budgeting for any necessary software or support

5. Starting digital record-keeping as soon as possible

Remember, MTD for IT is designed to make tax management easier and more efficient in the long run. While the transition may require some adjustment, the benefits of real-time tax information and reduced errors will ultimately support better business management.

Need Help?

At Bluebells Bookkeeping, we're here to support you through this transition. We can help you prepare for MTD for IT, choose the right software, and ensure your business is fully compliant well ahead of the deadlines.