Making Tax Digital (MTD) for Income Tax is set to become mandatory from April 2026, for sole traders and landlords with gross income of £50,000 or more.
With the deadline fast approaching, to avoid last-minute pressure and ensure a smooth transition, taxpayers should begin preparing now if they are not yet MTD-ready.
1. Verify your digital record-keeping
It is no longer enough to rely on mountains of paper records, or a mish-mash of documentation stored on various devices.
All business records must be digitised, ideally using HMRC-compliant and compatible software that will collate the important information in a secure, centralised platform.
Evaluate the systems and processes you currently use for record-keeping, and consider whether there is anything that could ‘slip through the cracks’.
Proactively identifying a software that will capture your income and expenses and learning how to use the platform competently, ahead of time, will help you to ensure that everything is properly accounted for.
2. Confirm your software compatibility
As aforementioned, MTD requires the use of compatible software for both record-keeping and reporting.
Be sure to research any software that you are considering using, to make sure it will satisfy the requirement for MTD. You can also seek advice from your accountant – with knowledge of your finances, they are perfectly placed to make recommendations.
If you are not in a position to invest in new software, it is possible to continue to use Excel spreadsheets, provided you can link them to HMRC’s systems via a bridging solution.
However, it is worth bearing in mind that there are many other benefits that come with using established cloud-accounting platforms.
3. Consider competency of those using software
It is essential that anybody involved in the management of your finances, or in filing submissions with HMRC, know how to effectively use the MTD-compliant software so that they do not hinder the filing process.
They should also be aware of the responsibilities that are placed upon them in terms of gathering and recording information.
4. Test the reporting process
There is still some time before MTD for ITSA is mandated, so there is no harm in running a few tests and trials now.
With quarterly filings a requirement, it could be worth getting into the habit of collating your data every three months, instead of leaving it until your annual Self-Assessment tax return.
This should help to expose any pressing issues before you are subject to HMRC’s scrutiny, and so you will have the opportunity to remedy these.
Taking action now reduces the risk of late submissions and penalties when the MTD deadline hits next year.
5. Engage with your accountant
Engaging an accountant to assist you with MTD is not only about peace of mind that you are compliant but, by leveraging their technical expertise and varied experience, you can streamline your financial administration, and embrace digitisation with confidence.
We can minimise the stress of complying with MTD ITSA by facilitating a seamless transition to digital record-keeping, and by ensuring that you are filing accurate quarterly submissions on time.
Beyond compliance, we can help you to troubleshoot any problems that arise with your software, record-keeping or submissions, and offer proactive tax planning advice throughout the year, to enable you to better manage your finances.
For advice and guidance on preparing for MTD ITSA, speak to our team today.
