With Making Tax Digital (MTD) for Income Tax less than six months away, HM Revenue and Customs (HMRC) has confirmed that it will be sending out letters to ensure taxpayers are ready.
If you are self-employed, a sole trader or a landlord, you need to be aware of MTD for Income Tax and the steps you need to take to be prepared.
What will HMRC’s MTD letters outline?
The purpose of the letters is to help self-assessment taxpayers prepare for the changes to come from April 2026.
If you do receive a letter from HMRC about MTD for Income Tax, it means the new regulations will apply to you based on the information you have submitted in your 2024/25 tax return.
The letters will offer valuable information on how you can prepare and includes a QR code that links to the GOV.UK guidance page and recommendations you should take.
This includes discussing MTD with accountants like us, who can provide comprehensive advice and support to help you adapt to the new regulations.
What changes will take effect from April 2026?
The new measures will see self-assessment taxpayers change how they keep financial records and report information to HMRC.
Your annual turnover determines when MTD for Income Tax will apply to you and if you receive a letter from HMRC, it means your turnover exceeded the £50,000 threshold and MTD regulations will apply to you from April 2026.
The threshold will drop to £30,000 in April 2027 and reduce further to £20,000 in April 2028.
Under the new guidelines, you will be required to maintain digital records using MTD compliant accounting software, as paper records will no longer be accepted.
As well as keeping digital records, you will be required to submit quarterly reports to HMRC and clarify your tax position at the end of each tax year.
How accountants can support you
The reducing threshold highlights why preparing for MTD is so important because it will take time to understand the changes and adjust accordingly to ensure you are completing your legal obligations.
It may not apply to you straight away, but implementing measures to meet the requirements early will help you adapt more seamlessly when MTD does apply.
This is where accountants can talk you through how MTD will work, explain the changes in place and what it means for your processes moving forward.
They can recommend the best digital tools to use that suit your needs, tips for keeping on top of your accounts and review your finances before you submit any information to HMRC.
They can spot any concerns, inaccuracies and help you assess your figures to clarify that all the data included in your digital accounting is correct.
As well as helping you get ready for MTD for Income Tax, accountants can review your current financial position and help you put proactive tax planning measures in place to reduce potential liabilities and enhance your own financial standing.
They can spot saving opportunities and put an effective tax strategy in place that is tailored to both yours and HMRC’s requirements.
This is the best time to prepare for MTD, even if it may not apply to you straight away. The support an accountant can provide is valuable and adapting before MTD becomes law will make the transition process much smoother.
Get MTD ready by speaking with our expert team of accountants.
