What is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax legislation requires self-employed individuals and landlords in the UK to use digital tools to keep records of their income and expenses, and to submit quarterly updates to HMRC through compatible software.
Making Tax Digital for Income Tax timelines
- April 2026: Self-employed individuals and landlords with an income of more than £50,000 will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software.
- April 2027: Self-employed individuals and landlords with an income of between £30,000 and £50,000 will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software.
Making Tax Digital update
There was a Making Tax Digital (MTD) update within the budget, and the Labour government reiterated its commitment to delivering on the current timeline and expanding the rollout for businesses with an income over £20,000 per year.
How will this impact accountants and bookkeepers?
MTD for Income Tax represents a significant shift in how small businesses manage their tax. This will require them to adopt digital software and adapt to new tax processes to ensure compliance. This will also bring the benefit of improved financial accuracy, efficiency, and insights.
The implementation of MTD for Income Tax is likely to have several impacts on accountants and bookkeepers.
1. Increased demand for advisory services
With MTD for Income Tax requiring businesses and landlords to maintain digital records and submit quarterly updates, accountants and bookkeepers may see an increased demand for advisory services to help clients understand the new requirements, select appropriate software and ensure compliance.
2. Changes to workflows
Workflows may need to be adjusted to accommodate the quarterly reporting schedule and the need for real-time access to client data. This could involve implementing new processes and technology to streamline data collection, analysis and submission.
3. Software expertise
Accountants and bookkeepers will need to become proficient in MTD-compatible software to assist clients effectively. This may require training and investment in software solutions that meet both their own and their clients' needs.
4. Client relationships
MTD for Income Tax presents an opportunity for accountants and bookkeepers to deepen their client relationships by providing value-added services, such as proactive tax planning, business advice and support with digital record-keeping.
5. Compliance challenges
While MTD for Income Tax aims to improve accuracy and reduce errors, there may be initial challenges with compliance, especially for clients transitioning to digital record-keeping for the first time. Accountants and bookkeepers will play a crucial role in guiding clients through these challenges and ensuring accurate reporting.
How QuickBooks Sole Trader can help
QuickBooks Sole Trader enables accountants and bookkeepers to support those that will be impacted by MTD for Income Tax.
Clients can snap and sort receipts, track mileage and manage their accounts all in one place, allowing bookkeepers and accountants to easily and efficiently prepare for their clients' self assessment.
What is QuickBooks Sole Trader?
QuickBooks Sole Trader delivers a suite of time-saving tools with built in AI-functionality. It is tailored to sole trader requirements that will ensure financial organisation and compliance.
It features:
- AI functionality
- Simple user interface and mobile app
- Tools to suit basic accounting needs & self assessment preparation
- Unique accountant view
- Built for growth
Who is QuickBooks Sole Trader for?
- Business type: Sole trader or landlord
- Business tenure: New starters or established businesses
- Tax needs: Income tax and subcontractor CIS (but no VAT)
- No employees: Business not yet reached a stage that need employees
- Finding footing: They are getting serious about the business and seeking systems and tools to streamline their processes
The next step
Whether you are a self-employed individual or a landlord, now is the time to prepare for MTD for Income Tax. QuickBooks Sole Trader simplifies record-keeping and tax submissions, making it easy to manage your finances and meet HMRC’s requirements.
Get in touch with Kelly Lewis at k.lewis@uhy-uk.com or one of our cloud accounting advisers to learn how QuickBooks can help you make a seamless transition and stay compliant.
