Making Tax Digital has arrived, but are you still confused over the new rules?

Making Tax Digital (MTD) for Income Tax has come into play from this month, so now’s the time for many landlords and self-employed individuals to get to grips with new reporting rules.

For many, some of the changes have been a bit confusing and if this applies to you, you’re not alone. We’ve gathered together some of the most common myths surrounding MTD and dispelled them, so that you can see a clearer way ahead.

Myth: “I’ll have to pay tax four times a year”

This is one of the biggest misconceptions and one that has caused unnecessary concern. While MTD requires quarterly updates, these are simply summaries of your income and expenses. Your tax is still calculated and paid annually, just as it is now. For many, this turns out to be far less disruptive than expected.

Myth: “I need to completely change how I work”

Work with spreadsheets? That’s fine! It’s easy to assume that MTD means starting from scratch with entirely new systems, but the truth is, many existing processes can still be used as spreadsheets, for example, are still perfectly valid when linked to compatible software.

The change is more about digitising and submitting information than reinventing how you run your finances.

Myth: “If I’ve missed the start, I’ll be penalised straight away”

Many who didn’t initially think the rules applied to them are now realising they do, so if this applies to you, or if you haven’t started yet, don’t worry, but make sure you act sooner rather than later to avoid penalties further down the line.

HMRC’s focus is on helping people transition into the new system. They are far more concerned with ongoing non-compliance than with those who are making a genuine effort to get set up. That said, leaving it too long can create avoidable pressure, especially when it comes to getting your records in order.

Myth: “I can just figure it out later”

This is perhaps the most risky assumption. While there is some leniency in the beginning, HMRC expects businesses to comply with the new MTD regulations.

And, don’t be fooled into thinking it’s a one-off task, it’s an ongoing way of working. The longer it’s left, the more difficult it becomes to catch up on records, choose the right tools, and build a routine that works for you.

Still need help?

If you’re still struggling or you’re not fully set up yet, getting the right support as soon as possible will be beneficial in the long run.

Monahans is running a free support session designed specifically to help landlords and self-employed individuals get up to speed with Making Tax Digital for Income Tax. It’s a chance to understand what’s required, see how it works in practice, and ask questions in a clear, straightforward environment.

Contact us for more information or secure your place here.

Katy Tovey