MTA FOR MTD: MATON TAX ACCOUNTING FOR MAKING TAX DIGITAL

Making Tax Digital for Income Tax

Making Tax Digital (MTD) is the new way that HMRC and the UK Government want small businesses to report their income. 

VAT-registered businesses already use Making Tax Digital, but the Government now want to extend the scheme to non-VAT registered businesses as well. 

The main changes we expect to see are:

· Quarterly reporting of income to HMRC (once every three months) instead of annual reporting (only once a year)

· Records have to be kept electronically

· Specific software has to be used that is compatible with Making Tax Digital

These changes do not need to cause more work or worry for small business owners, property landlords or sole traders, as long as they are prepared for MTD. 

We have designed an easy way for small businesses and landlords to get MTD compliant without having to pay for new software, put in more work or learn bookkeeping. This is explained below.       

 Making Tax Digital for Income Tax means that quarterly reports will need to be filed with HMRC to let them know what a business’ income and expenses have been for the previous three months. 

As we understand it, each business will then need to file a year-end report with HMRC to summarise everything they have already reported throughout the year. This year-end report will probably be quite similar to the Self-Assessment tax returns that business owners and landlords already submit. 

At the date of the 2025 Spring Statement, HMRC confirmed that they will not be providing free software to make end of year submissions for MTD taxpayers. This means it will be compulsory to use either third-party software or an accountant/ tax agent if you are within the scope of Making Tax Digital. 

The aim of Making Tax Digital is to reduce the time delay between earning income and reporting it to HMRC.

This sounds like more work for taxpayers but can actually be made easy by following the approach that we set out further down this page. 

 Self-employed people and property landlords will need to be MTD compliant for Income Tax from:

• April 2026 if they have annual business or property income of £50,000 or more
• April 2027 if they have annual business or property income of £30,000 or more
• April 2028 if they have business or property income of £20,000 or more, according to announcements that accompanied the 2025 Spring Statement

The £50,000/ £30,000/ £20,000 limits above are based on gross income (the amount you earn before taking off expenses, sometimes called turnover). That means complying with Making Tax Digital even if your profits are less than these amounts.  

Some people are self-employed and also receive property income. We have been told that taxpayers in this situation need to add up the total income from their property rental and other businesses to decide whether/ when they have to be MTD compliant. 

It may be possible to claim exemption from Making Tax Digital, but most people with small businesses will probably not be eligible for an exemption. Exemptions announced so far include some non-resident performers and sportspeople, taxpayers with power of attorney, and those who cannot use digital services. 

First, you should check if or when Making Tax Digital will apply to you. More information is available above or on HMRC’s website.

Once you know MTD applies to your business or property income, you should get your records in a format that can be submitted to HMRC when they are due. 

You can purchase software to submit records yourself, however HMRC say that only certain approved software will be MTD-compliant. 

HMRC say that they will not be releasing their own free software for the end-of-year submission. This announcement means taxpayers relying on software will need to make sure that it can deliver a full tax return service as well as in-year record-keeping (some only offer one or the other). This is likely to push up software prices and the time it takes to file accurately if not using an accountant.  

There is also nothing stopping third-party software providers from putting their prices up, so you should be careful before you commit to MTD software, even if it looks cheap to begin with. 

The other disadvantage of using software to submit Making Tax Digital yourself is that you have to learn to use it, which usually means learning tax rules, accounting and bookkeeping on top of all of the other commitments of running a business. 

Once the final report is submitted, you as the taxpayer remain responsible for the accuracy of the reporting, which means that you can be made liable for penalties or interest if you get it wrong. 

To help our clients avoid the extra costs and problems that Making Tax Digital might cause, we are offering a full bookkeeping, accounting and tax service for MTD. 

Instead of choosing, purchasing and learning new software, small business clients can deliver their records to us in electronic or paper format each quarter. 

We will then do everything else, including creating the quarterly report, sending it for your approval and submitting the approved copy to HMRC. 

We will also take care of both the year-end report and any correspondence with HMRC, meaning our clients spend less time on bookkeeping and more time on their business.   

Minimal effort from you:

We are expecting that business bank statements and invoices will be all that is needed for most small businesses, meaning Making Tax Digital will be as easy as sending us an email.

We are also happy to work from paper documents, which means clients who prefer to keep paper records do not need to change at all. Some might find this even easier than their current system.  

Reduced cost:

Most taxpayers who use software to file reports themselves will need to pay a subscription for quarterly reporting, plus the additional cost of software that can handle the end-of-year return. 

Not all software marketed as MTD compliant can actually produce the end-of-year return, and those that do are likely to charge a premium for it. HMRC are not offering their own free software for MTD taxpayers to make the final submission, so those who previously filed their own tax returns will see increased costs and complexity.    

We will not be asking clients to pay for software and will process reports on our own system instead, meaning that there is no need to choose or pay third parties unless you want to. 

More reliable bookkeeping and reporting:

We are fully-qualified accountants, tax practitioners and bookkeepers. This means that the work we do is accurate to the standard required by HMRC and Making Tax Digital. This reduces the risk of under or overpayment of tax.

As small business experts we can also help with almost all aspects of tax, compliance and record-keeping, unlike traditional bookkeepers who only offer a part service.  

We also have access to agent-dedicated contacts at HMRC which are not open to unrepresented taxpayers, which means we can resolve problems quicker and more effectively than people using software to file their own reports.  

Not only are we fully up to date with Making Tax Digital rules, we are also small business accounting and bookkeeping experts. 

We have over 30 years’ experience in professional accounting, we run our own small family business, and we work from our office in Salisbury so that clients can always reach us for a chat when they need us.  

If you are a small business owner, sole trader or landlord and would like to use us to file your Making Tax Digital reports then please contact us using the details below. 

Telephone: 01722 393083

Email: enquiries@matonaccountancy.com

Or visit us: 

Maton Chartered Certified Accountants

Unit 4, Boathouse Meadow Business Park

Cherry Orchard Lane

Salisbury

SP2 7LD