Making Tax Digital for Income Tax

You will need to comply if your qualifying income (i.e. income before expenses) is greater than £20,000. 

Qualifying income is: 

• Income from self-employment
• Income from rental properties. 

Where you have income from both sources, you need to consider your combined qualifying income to see if you qualify. 

Yes, exemptions will apply for individuals who meet certain criteria.  E.g. those who are unable to use digital tools due to age, disability, or remote location. 

It will be necessary to apply to HMRC for exemption, it will not be given automatically.

If you are no longer self-employed, a landlord or your income drops below the threshold, you may not need to comply with MTD for Income Tax.  

When your business ceases, you will need to notify HMRC that your business has ended after you have made your final quarterly submission. 

If your income falls below the threshold, you will only be able to remove yourself from MTD for Income Tax after your qualifying income has been below the threshold for three consecutive tax years.   

Yes, you can voluntarily sign up for MTD for Income Tax even if you do not meet the minimum income threshold. 

If you receive joint income, such as income from a jointly owned property, each individual must report their share of the income separately for Making Tax Digital (MTD) for Income Tax purposes. MTD requires each taxpayer to maintain their own digital records and make their own submissions to HMRC, even if the income is derived from a jointly held source. 

For example, if you and another person own a rental property together, you should each keep digital records of your respective share of the income and expenses. When making quarterly updates and your final submission, you must report only your share, not the total joint income. This ensures that HMRC receives accurate information for each taxpayer’s liability. 

You must keep separate digital records for each business or property. However our MTD-compatible software often allows you to manage multiple income streams within a single platform. 

If your UK property income exceeds the threshold, you will need to comply with MTD for Income Tax, regardless of your residency status. 

You must keep digital records of all business income and expenses. This includes sales invoices, receipts, and other relevant documents. The records must be maintained in MTD-compatible software or apps. 

You do not need to keep digital copies of your invoices or receipts, however you will need to retain the original source documents in line with the normal and current record keeping requirements. 

Spreadsheets won’t be sufficient to comply with MTD.  If you use spreadsheets to record your data you will need specialist bridging software as well to ensure the data is transferred to HMRC in the correct digital format. Simply emailing or uploading spreadsheets directly is not sufficient.

HMRC have introduced a new penalty system for MTD.  Penalty points will be issued for missed submissions and/or failing to keep digital records. 

Financial penalties will be issued as points accumulate, starting with a £200 penalty after 4 points are received.