Making Tax Digital for Income Tax means a significant change for bookkeepers, accountants and the small businesses they support. At the Institute of Certified Bookkeepers (ICB), we're here to guide and support every step of the way.
What is Making Tax Digital (MTD)?
MTD is the UK government initiative designed to make the tax system more efficient, effective, and easier for taxpayers by mandating digital record-keeping and quarterly online submission of income tax returns.
Where Are We Now with MTD?
VAT: MTD for VAT has been in place since April 2022. All VAT-registered businesses, no matter their turnover, need to maintain digital records and submit VAT returns using compatible software.
Income Tax: MTD for Income Tax (MTD IT) is set to begin in April 2026. This will initially apply to self-employed individuals and landlords with annual income above £50,000. Those earning between £30,000 and £50,000 will follow in 2027. Partnerships, trusts, and estates are expected to be brought into the fold later, but not just yet.
What Does This Mean for Bookkeepers?
I believe the government's plan to make digital bookkeeping mandatory for all businesses empower bookkeepers to select clients and employers who truly value the expertise and unique approach of bookkeepers. We know that MTD brings challenges, but it’s also an opportunity to showcase the essential role you play in your clients’ financial success. It’s important that you know that these submissions are NOT full tax returns, so you do not need to have completed the ICB Self-Assessment modules in order to submit on your clients’ behalf. You do need to be full Member of ICB to act for them (level 3 and above).
Here are some key things to focus on:
- Identify Your Affected Clients: Start by pinpointing which clients will need to comply with MTD IT. Self-employed individuals and landlords are your immediate priorities. Look at their income tax returns for the 2024/25 tax year to determine if they’ll be required to comply starting April 2026.
- Encourage Digital Record-Keeping: If your clients are still using manual methods, now is the time to guide them toward digital solutions. Let them know this isn’t just about compliance – digital systems make everyone’s lives easier.
- Find the Right Software: Choosing HMRC-approved software that suits your clients’ needs is crucial. We’ll provide guidance and training on the best options available, so you can feel confident recommending and implementing solutions.
- Stay Flexible and Informed: MTD is evolving, and more changes may come. We’ll keep you updated on what’s happening and help you adjust your approach as needed.
Next Steps
- Start the Conversation: Begin discussing MTD with your clients now. Reassure them that you’ll handle the technical details and guide them through the changes.
- Plan Ahead: Think about which clients need attention first and set realistic timelines for transitioning them to digital systems.
- Lean on Us: Don’t hesitate to reach out if you have questions or concerns. We’re here to help!
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