Amy Stubbins, who heads up the Personal Tax teams in our Colchester and Mersea offices, looks at the new MTD (Making Tax Digital) rules which are coming into force in April and asks whether all those who are affected are aware of their new commitments?
Approximately 12.5million people are currently required to file self-assessment tax returns and perhaps not surprisingly, around one million of those individuals are currently facing a £100 penalty, with possibly further charges, having missed the 2024 to 2025 tax year of 31 January 2026.
Is it just human nature that so many put off completing tax returns? Certainly, the recent stats produced by HMRC suggest that there are a significant number of us that leave the task literally to the very last minute; 475,722 taxpayers waited until the final day to file their return and 27,456 of these pressed the button in the very final hour.
From 6 April 2026, those taxpayers with a total income (not profits) from any sole trades and property businesses carried on in 2024/25 that exceeds £50,000, will need to use software to keep digital records and send HMRC quarterly updates of income and expenses. HMRC may suggest that these changes are a “light-touch” and “not extra tax returns” but for the one million still to submit returns and the half a million procrastinators who left filing to the last day, these updates might prove an even greater hurdle.
Speaking with my clients as we prepare the move to quarterly digitally filed returns, there is clearly still much confusion. HMRC has only just started sending out the thousands of letters warning the eligible sole traders and landlords that they must comply with the new MTD system for income tax from April 2026. One client, self-employed but winding down towards retirement, thought she had timed things perfectly as her income is now below the £50,000 threshold and was disappointed to learn that as the eligibility was assessed on her previous year’s return, she would need to step up to MTD. And as the threshold for trading and property income drops to £30,000 in April, 2027 and £20,000 on 2028, it is likely she will be submitting digital quarterly returns for some time.
New enquiries have come primarily from those who have been happy to submit their tax returns without the aid of an accountant but are now carefully considering whether they are comfortable switching to or managing the prescribed accounting software. Without doubt, the new MTD measures mean that even those with simple business structures and comfortable with technology are considering how to make best use of their resources – mainly their own time. Others, and I imagine many of the million late filers, are asking whether they can face the thought of meeting quarterly deadlines without some assistance.
Whatever your reason, if you are one of the self-employed or a landlord receiving a notification from HMRC that you are eligible for MTD for Income Tax, and you are unsure that you want to embrace MTD on your own, please reach out now at Amy.Stubbins@streets.uk to arrange an exploratory call, or email mtd@streets.uk for a specialist in your area.
