We will continue updating this document as we learn more - LAST UPDATE - 22/01/2025

On Thursday, Johann hosted an informative webinar on MTD IT - important updates, what to expect, how to prepare and also how to manage in Engager

If you've not watched the webinar - here you go 

We've also written a series of email templates for you to use to help manage your communication and role out strategy, using engager - https://help.engager.app/hc/en-gb/articles/23971663558034-MTD-IT-Email-Templates

We also thought that we'd piece together some of the most common concerns and frequently asked questions, that were asked on the Webinar.

1. What are the MTD Thresholds (please note it's TOTAL INCOME not NET) 
   • £50K+ for 2026 roll out
   • £30K+ for 2027 roll out
   • Under £30,000 Annual Turnover: Sole traders and landlords with combined income below £30,000 are exempt from MTD IT requirements for now
2. What client type are affected first
   • Sole Traders and Landlords are the first to be effected
3. Is the threshold made of mixed income streams or from Sole Trader / Rental only
   • In short, it’s the total income across all taxable streams, not just one specific source like rental or sole trader income, that counts towards the £50,000 / 30K threshold
4. Question: Which tax year is the income assessed on
   • The previous tax year
5. Question: what are the quarterly timelines and filing deadlines for each
   • Deadlines will be 1 month and 5 days
   • 6 April to 5 July: Deadline 5 August
   • 6 July to 5 October: Deadline 5 November
   • 6 October to 5 January: Deadline 5 February
   • 6 January to 5 April: Deadline 5 May
6. Question: Are the QTR periods set, or could they follow VAT return periods?
   • The quarterly periods are set and may not align with VAT periods.
7. Question: Any talk about staggering filing to reduce impact on practices?
   • no, HMRC have been clear all returns will be due August November February may
8. Question: Any benefit to early adoption?
   • : only the opportunity to gain experience while not mandatory ready for when it all starts
9. Question: Can Engager do the filing of the quarterly returns, or will this be done via signing and bookkeeping software?
   • This will be handled by native bookkeeping software and not Engager. We'll assist with tracking jobs / email comms / reporting and signing requests

Other items to note:

• Filing requirements: Quarterly reports will cover income and expenses from self-employment and rentals, with annual filings summarizing all income sources.

• Quarterly filings are separate from VAT returns and aligned to the tax year (April-March).

• Adjustments to previous filings can be made through software and included in subsequent returns.

• Tax payments remain annual, with no changes to the 31st January deadline.

• Registration and deregistration: MTD registration will mirror the VAT MTD process, allowing mass migration. Deregistration is not permitted once registered, even if income drops below thresholds.

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Update Direct from HMRC - the power of Engager and our community

In our “getting ready for MTD” webinar, several questions were asked that Johann was unable to answer, so Johann contact Sam Wood, an HMRC Agent Engagement Lead, to help answer the questions, and he was very happy to help!

1 - Will Taxpayers auto enrol in MTD IT?

No. Everyone has to either enrol themselves or be enrolled by their tax agent

2 - Once Enrolled, can a taxpayer exit MTD IT if their income drops below the threshold?

Once you’re mandated, you are mandated for 3 years min. If your income drops below the threshold for three consecutive years, you can opt-out

3 - When will HMRC start communicating MTD IT to taxpayers?

Comms to customers starting soon

4 - Are partnerships included in MTD IT?

No, the Partnership income is reported annually and doesn’t count towards MTD IT Thresholds

5 - Which year is considered for the MTD IT income Threshold test?

2024/25 is the assessment year for 2026/27 – HMRC always runs 2 years behind  - Which provides stability as status is based on a full year’s tax return. So, in April, look back 2 months to the return, due 31 Jan; that’s the return to review for assessment each assessment.

So if the taxpayer’s landlord and/or self-employed turnover was over £50,000 in 2024/25, then they are required to be MTD IT registered in 2026/27 if in 2025/26 the taxpayer’s landlord and/or self-employed turnover was over £30,000 then they will be are required to be MTD IT registered in 2027/28

As a reminder, the four Quarterly returns report income and expenses, the annual return reports everything but should be more efficient because the annual report should be auto-populated with information already on record at HMRC such as PAYE

We will continue to deliver content and webinars on this topic ensuring you are ready for MTD IT

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Sole Traders Current Thresholds:

1. From April 6, 2026:
   • Sole traders with gross income exceeding £50,000 from self-employment will be required to comply with MTD for ITSA.
2. From April 6, 2027:
   • The threshold lowers to gross income exceeding £30,000.

Key Points:

• The threshold is based on gross income, not profit. This includes total revenue from self-employment and property rental (if applicable).
• Those with income below these thresholds are not mandated to join MTD for ITSA but can do so voluntarily.

Future Plans:

• The government has indicated plans to lower the threshold further to £20,000, but no implementation date has been confirmed.

If you’re a sole trader and your income exceeds the relevant threshold, you’ll need to:

• Keep digital records.
• Use MTD-compliant software to file quarterly updates and a year-end declaration with HMRC.

Landlord - Current Thresholds:

1. From April 6, 2026:
   • Landlords with gross rental income exceeding £50,000 will be required to comply with MTD for ITSA.
2. From April 6, 2027:
   • The threshold lowers to gross rental income exceeding £30,000.

Key Points:

• The threshold is based on gross rental income, not net profit. This means it includes the total rental income received before deducting any allowable expenses.
• If a landlord has both self-employment and rental income, the combined gross income is used to determine whether the threshold is met.

Future Plans:

• The government has suggested lowering the threshold to £20,000 in the future, but no specific timeline has been confirmed.

Landlords meeting the threshold will need to:

• Keep digital records of their rental income and expenses.
• Use MTD-compliant software to file quarterly updates and an end-of-year declaration with HMRC.

Filing Requirements for MTD IT

MTD IT requires accounting software to file tax returns, including four NEW quarterly updates and one annual filing. The quarterly updates will include income and expenses for the preceding three months, filed within one month and five days of the quarter-end. 

The annual filing will include comprehensive financial details, similar to the current SA100 tax return. 

Your Key Takeaways to help with MTD IT Roll Out

1. Categorise your Clients

Begin by analyzing your client base to identify those impacted by MTD. This involves sorting clients into categories:

• Sole Traders: Identify those with turnover exceeding £50,000 (for the 2026 rollout) and £30,000 (for 2027).
• Landlords: Similarly, determine those meeting the turnover thresholds.
• Exempt Clients: Note clients with income below £30,000 who are currently exempt but may need monitoring for future changes.

2. Educate Clients

Educate your clients about MTD requirements and their implications. Emphasise the need for compliance, including quarterly filings and the use of accounting software. Clarify common misconceptions, such as how combined income sources (e.g., self-employment and rental income) affect eligibility.

3. Implement Accounting Software

Ensure clients transition to compliant accounting software capable of handling MTD filings. Offer support to onboard them and provide training if necessary. The software should facilitate quarterly submissions and annual filings.

4. Develop a Filing Schedule

Inform clients of the new filing timeline, which includes:

• Quarterly updates of income and expenses for the past three months, with filings due one month and five days after the quarter-end.
• Annual filings summarising all income sources, following the tax year (April to March).

Align client operations with this schedule to avoid delays and ensure compliance.

5. Provide Ongoing Support

Offer continued assistance to clients, addressing concerns or questions as the rollout progresses. Use resources like webinars, community groups, and direct consultations to ensure they feel supported during the transition.

6. Prepare for Potential Adjustments

Although unlikely, if there are last-minute changes to HMRC guidelines or deadlines, ensure clients are informed promptly. Advise them to approach the rollout as though the 2026 deadline will proceed as planned.

This phased, customer-focused rollout aims to ease clients into the new system while minimizing disruptions and ensuring compliance well ahead of the MTD deadlines.