MTD IT FAQ’s: Everything You Need to Know

Written By Karen Taylor

1. What is MTD IT?

MTD IT (Making Tax Digital for Income Tax) is part of HMRC’s initiative to modernise the tax system. It requires self-employed individuals (Sole Traders) and landlords to keep digital records of their income and expenses and submit quarterly updates to HMRC using MTD-compatible software.

2. Who does MTD IT apply to?

MTD IT will apply to self-employed individuals and landlords with an annual business or property income as follows:

  • Exceeding £50,000, starting from April 2026.

  • Exceeding £30,000, starting from April 2027.

  • Exceeding £20,000, starting from April 2028.

3. What records do I need to keep digitally?

You’ll need to maintain digital records of:

  • Income

  • Expenses

  • Bank transactions related to your business or property

These records must be stored in MTD-compatible software and submitted to HMRC via quarterly updates.

4. How often do I need to report under MTD IT?

You’ll need to submit:

1. Four quarterly updates summarising your income and expenses throughout the year. The periods will be cumulative, so updates will be due for the following periods each tax year:

  • April to June (submission due by 7 August)

  • April to September (submission due by 7 November)

  • April to December (submission due by 7 February)

  • April to March (submission due by 7 May)

Each submission effectively supersedes the previous one.

2. A Final Declaration (Self-Assessment Tax Return) to declare all your income and confirm your tax liability.

5. What software do I need for MTD IT?

You’ll need MTD-compatible software to manage your records and submit updates. Popular options include:

  • Xero

  • FreeAgent

We can help you choose the best software for your needs and set it up for you.

6. What happens if I don’t comply with MTD IT?

Failure to comply with MTD IT requirements may result in penalties from HMRC. These could include fines for late submissions or non-compliance with digital record-keeping rules.

7. Do I still need to file a Self-Assessment tax return?

No, MTD IT replaces the traditional annual Self-Assessment tax return. Instead, you’ll submit quarterly updates and a Final Declaration through your MTD-compatible software.

8. What should I do now to prepare for MTD IT?

  • Determine when MTD IT will apply to you based on your income.

  • Choose and set up MTD-compatible software.

  • Organize your records to ensure accuracy.

  • Seek professional advice to streamline the transition.

9. How can Pink Lily Accounting Solutions help me with MTD IT?

We provide:

  • Expert advice tailored to your situation.

  • Setup and training for MTD-compatible software.

  • Assistance with quarterly updates and year-end submissions.

  • Ongoing support to ensure compliance and peace of mind.

Still Have Questions? We’re Here to Help!

At Pink Lily Accounting Solutions, we specialise in helping self-employed individuals prepare for MTD IT. Whether you need help setting up software or understanding your obligations, we’re just a call away.

E-mail us now on karen@pinklilyaccounting.co.uk to see how you can work with us.

Building a successful future, together. 

Karen Taylor
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