Latest / The 3Bz Podcast - Building Better Business / EP132 - The Final Countdown to MTDIT: Are You Ready for April?

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EP132 - The Final Countdown to MTDIT: Are You Ready for April? · The 3Bz Podcast - Building Better Business

• 0:01
  Hi there business owner, and welcome to the Three BS Podcast,
• 0:04
  the place where we go beyond the numbers and dive into strategies
• 0:07
  to help you build a Better Business one step at a time.
• 0:11
  I'm your host Stephanie, a multi awarding entrepreneur with over
• 0:13
  a decade of experience in the bookkeeping and currency world.
• 0:17
  If you're a business owner looking to streamline, grow and
• 0:19
  get back the time that you deserve, you're in the right
• 0:21
  place tackling real world problems, answering tough
• 0:24
  questions, and digging deep into business building secrets in
• 0:27
  just 15 minutes each week. So Are you ready to build a
• 0:31
  Better Business with confidence and clarity?
• 0:33
  Then let's go. Hello and welcome back to
• 0:37
  another episode of the Three B's podcast where we keep business
• 0:40
  simple, finance honest and tax talk totally panic free.
• 0:46
  As always, I'm your host, Stephanie Marshall, and today
• 0:48
  we're going to talk about making tax digital for income tax or as
• 0:52
  they are now calling it, MTD it. It's been on the horizon for
• 0:56
  what feels like forever, delayed more times than a budget airline
• 1:00
  flight, but now it's officially happening.
• 1:03
  And true, April 2026 might feel like ages away, but it's just
• 1:08
  not. We're now just six months away
• 1:11
  from the start of the first tax year under MTD IT.
• 1:15
  If you're a sole trader or a landlord earning over £50,000
• 1:19
  combined, then this episode is for you.
• 1:23
  In this episode I'm going to explain what MTD actually is
• 1:25
  without jargon, who's included and when, what you need to do
• 1:30
  now to avoid chaos later and how to make it all way less painful
• 1:34
  than it seems. Let's get into it.
• 1:37
  So what is making tax digital for income tax?
• 1:40
  In the plainest of English, it's HMR CS way of moving
• 1:43
  self-assessment into the digital world.
• 1:46
  If you are self-employed or a landlord and your income stress
• 1:51
  income, not profit income is over a certain threshold, you
• 1:54
  will be required to keep digital records.
• 1:57
  Use HMRC compatible software that's not spreadsheets guys.
• 2:01
  Submit quarterly updates to HMRC and send a final end of year
• 2:05
  submission. So instead of 1 tax return per
• 2:08
  year, you'll be sending 5 things, 4 quarterly plus one
• 2:12
  year end. Why?
• 2:14
  Because HMRC wants more real time view of your income and
• 2:18
  let's be honest, they want fewer errors and they want to make
• 2:20
  sure that they get in the tax that they are due.
• 2:22
  MTD starts with two groups. So right now it's just going to
• 2:25
  be the two groups, which is sole traders, which is any person who
• 2:28
  has a business, runs a business that's not a limited company or
• 2:33
  a charity. Sole traders are often when
• 2:36
  people just start a job. So if you're a tradesperson
• 2:39
  crafting, you'll just go out on your own sort of thing.
• 2:41
  You register as self-employed, that makes you a sole trader.
• 2:45
  If you have more than one business or rental property,
• 2:47
  it's the total income what matters.
• 2:49
  Important dates that you need to remember are April 2026.
• 2:52
  You're included. If your gross income for your
• 2:55
  2425 tax return is £50,000 or more and your 2425 tax return is
• 3:01
  due by January 2026, you should already be doing it.
• 3:04
  You've heard me talk about on the podcast time and time again.
• 3:07
  It's important to get done nice and early to know where you
• 3:09
  stand and this year it is more important than ever.
• 3:12
  If your 2425 gross income across sole traded businesses and
• 3:17
  rental property is £50,000 or more, from next April you will
• 3:21
  be required to do the four quarters and the end of the year
• 3:23
  submission. As it stands, April 2027 is
• 3:26
  going to be on with £30,000 or more and below 30,000.
• 3:30
  It's being reviewed right now. It's not mandatory, but there
• 3:33
  are rumors that it will be 20,000 lbs from April 2028.
• 3:36
  We have to listen to Rachel Reeves or whoever is in
• 3:39
  parliament when they do their budgets to get final
• 3:43
  announcements for any of those. But April 2026 is signed,
• 3:45
  sealed, delivered. The beta is already alive,
• 3:47
  people are already testing it out.
• 3:49
  So it's important to note that that is coming into force from
• 3:53
  April 2027. Like I say, it's likely from
• 3:56
  30,000 lbs upwards if you weren't self-employed in 2425.
• 4:01
  So we're not going to be included from the 50,000.
• 4:03
  But then from April 2027 the qualifying income is 607080
• 4:09
  thousand. You'll still be included so
• 4:10
  anything over 30,000 will be included.
• 4:13
  Realistically, I think what's going to happen is the majority
• 4:16
  of people who are self-employed, who or have property income will
• 4:20
  need to be ready by April 2028, which means your systems and
• 4:23
  processes need to be in place long before then and there is no
• 4:27
  better time than the present. I'm going to talk about MTD
• 4:30
  quite a lot on the podcast over the next six months because I
• 4:33
  want to make sure that every business owner that it affects
• 4:36
  is prepared and fully understands what is required of
• 4:39
  them and they've got the support and systems they need to do it
• 4:42
  themselves going forwards or to take the stress off their plate
• 4:45
  in the future. When it comes to these quarterly
• 4:47
  submissions, a lot of it. So business owners who are once
• 4:51
  a year clients become shoebox clients.
• 4:53
  So clients who come to see us once a year only for
• 4:56
  self-assessment or tax return purposes, they bring us usually
• 4:59
  a spreadsheet or a box full of receipts, have all their
• 5:03
  expenses from throughout the year.
• 5:05
  Those sorts of business owners are going to have to really
• 5:06
  change the way that they think, change their behaviors and their
• 5:10
  habits because it's going to have to be done quarterly as a
• 5:12
  minimum. I always advise quarterly as a
• 5:14
  minimum anyway as a business owner.
• 5:16
  But for those who have been in business a while, for those are
• 5:18
  used to doing it once a year, it is a big shift for them.
• 5:21
  So the earlier you can start practicing getting information
• 5:24
  to your bookkeeper, accountant or updating your own books
• 5:28
  quarterly is the minimum, the easier it will be when it
• 5:30
  becomes mandatory and then you've got less chance of
• 5:32
  getting it wrong and getting fines and penalties.
• 5:34
  One of the biggest questions that I'm asked is what software
• 5:36
  can you use? This is the big shift, I think
• 5:39
  for people that are used to paper records or spreadsheets
• 5:42
  because they just won't cut it anymore to complying with MTD
• 5:46
  legislation. You will need MTD compliance
• 5:49
  software to record your income and expenses, submit those
• 5:52
  quarterly updates and finalise your annual figures.
• 5:56
  Some popular options are 0 which we love and use ABCSUK free
• 6:01
  agent. Again a fantastic option if you
• 6:03
  have a Metal or a NatWest bank because you can get software
• 6:06
  free of charge. Sage they've introduced a free
• 6:09
  and a paid option I believe, although I haven't tested it out
• 6:12
  and QuickBooks have also got a solution too.
• 6:17
  If you are a spreadsheet lover and you really don't want to
• 6:20
  move to software, there will be bridging tools and the HMRC do
• 6:23
  list all of the recognised tools and softwares that you can use.
• 6:28
  Although I I promise you it's not ideal and the earlier you
• 6:30
  start using this software the better.
• 6:33
  My advice is to choose a platform that you'd actually use
• 6:35
  because it should make your life easier, not add more admin.
• 6:38
  This MTD should make it much easier for you.
• 6:41
  Not only that, it will show you a running total of what tax you
• 6:44
  should be keeping to one side. So it's going to be easier than
• 6:47
  ever to prevent those mistakes from not saving for tax, not
• 6:50
  saving enough for tax, that panic at year end that maybe
• 6:53
  you've been going through for years and years as a business
• 6:55
  owner. So what are quarterly updates?
• 6:57
  Right now you do 1 tax return a year under MTD.
• 7:01
  You'll submit a summary of income expenses every quarter
• 7:05
  and then one final return to confirm and make all your end of
• 7:08
  year adjustments. It's important to stress that
• 7:10
  you won't pay tax quarterly yet. They absolutely can change their
• 7:15
  mind on that, but HMRC will give you an estimate of what's
• 7:18
  booting up, which again, I think is much easier for clarity.
• 7:21
  So yes, it's more frequent, but it's also more predictable.
• 7:24
  I think I'm one of the minorities when I think this MTD
• 7:26
  is a good thing because it's actually going to prevent
• 7:28
  business owners getting into some of the messages they have
• 7:30
  over the years by either ignoring it or not putting it in
• 7:33
  place soon enough and then getting to the end of the year
• 7:36
  and not being able to pay their tax bill or not having all the
• 7:38
  documents to support reducing their tax bill by allowable
• 7:42
  expenses. The deadlines follow the same
• 7:44
  pattern each year. And once your system is in
• 7:46
  place, it can be just another part of your workflow.
• 7:49
  It can be smooth. It's not about micromanaging
• 7:52
  from the HMRC perspective, it is about removing surprises.
• 7:57
  And they will get the tax they're due quicker.
• 7:59
  They won't have to wait for the tax they're owed, and you'll be
• 8:02
  able to save more effectively for your tax bill so that
• 8:05
  you're, you've not got the surprise at year end too.
• 8:08
  So you're probably thinking, well, why are you talking about
• 8:09
  this now? We've got six months, what do I
• 8:11
  have to do right now? Well, The thing is, is waiting
• 8:13
  until 2026 is just far too late. To avoid the last minute panic,
• 8:17
  you're going to want to check your income now.
• 8:19
  Check your 2425 tax return if you haven't done it yet or if
• 8:22
  you haven't instructed anybody to do it yet.
• 8:25
  Get on that sooner rather than later.
• 8:26
  Are you over that 50,000 LB threshold from self-employed or
• 8:30
  property income? Don't forget it's the income,
• 8:32
  not the profit. It's the money you physically
• 8:34
  get from the sale. If you use things like Stripe or
• 8:38
  PayPal, it's the actual physical cost of the sale, not the amount
• 8:42
  that's paid out to your bank. I think it's really important to
• 8:44
  stress that because many business owners make errors when
• 8:47
  they're checking their turnover because they don't count the
• 8:49
  actual sale value, they only count what hits their bank.
• 8:53
  If yes, you are over that 50,000 LB threshold then MTD it will
• 8:56
  apply to you from April 2026. To avoid the last minute panic,
• 9:00
  you're going to want to get on compatible software now, Not in
• 9:03
  2026. Not in April next year.
• 9:07
  This gives you time to learn it, set it up properly and avoid
• 9:10
  overwhelm. Many bookkeepers and accountants
• 9:12
  are already making that digital ready.
• 9:14
  I know we are with both free agent and 0 so we can help you
• 9:17
  set it up. We can get things in place.
• 9:19
  Even if you want to continue doing it yourself, there is
• 9:21
  people out there that can help support you with your software,
• 9:24
  to get it working for you, to get you to understand it and
• 9:27
  make it as easy and pain free as possible.
• 9:30
  Start quarterly reviews now too, if you're not already doing
• 9:33
  them. Even if you don't have to
• 9:34
  submit, practice this process. It will highlight gaps in your
• 9:38
  records, It will help get you into that rhythm.
• 9:41
  It will help change that habit and that behaviour so that taxes
• 9:44
  don't have to be so stressful. And finally, speak to your
• 9:48
  bookkeeper accountant. If you don't have one, get one.
• 9:51
  We can help you plan, choose the right tech and stay ahead of the
• 9:55
  curve. So it's one less thing you have
• 9:56
  to remember. You don't need to listen into
• 9:58
  the budget. You don't have to worry about
• 10:00
  the changes because your bookkeeper accountant, if you
• 10:02
  have one, should give you that information if it affects you
• 10:06
  and when it affects you so that you can make sure you are
• 10:08
  compliant throughout the year. Look, I know that this sounds
• 10:11
  like an absolute fact. It sounds like a waste of time
• 10:14
  and it sounds like so much more admin you've got to do every
• 10:16
  single quarter. And yes, it is more admin
• 10:19
  upfront, but once it's embedded MTD, it can actually help you.
• 10:23
  As I said, it gives you a clearer picture of your finances
• 10:25
  all year round, specifically if you're a seasonal business, if
• 10:29
  your busy period is Q2 and then you have a really quiet Q3, that
• 10:35
  will be reflected in those quarterly submissions so that
• 10:37
  you're not just holding on to money and cash flow can be freed
• 10:41
  up. If you're saving money for
• 10:42
  taxes, you don't need to or if you need to save a bit more as
• 10:45
  you're heading into your busier period, knowing that information
• 10:47
  is really going to help you build your business.
• 10:50
  It also stops that last minute tax stress in January that I
• 10:53
  talk about every single year on here, on the blogs, on webinars
• 10:58
  all the time. I talk about how you don't want
• 11:00
  to leave it till January. Not only is it stressful for
• 11:03
  you, but you're not going to get as a responsive response from a
• 11:08
  bookkeeper and accountant because tax stress in January
• 11:11
  works for accountants and bookkeepers too.
• 11:13
  Like it's our busiest time of the year.
• 11:15
  It causes huge amounts of stress for us for the last minute.
• 11:18
  People that suddenly decide in December that they can't do it
• 11:21
  themselves and they need to instruct a new client.
• 11:23
  Onboarding a new client to submit a tax return is not an
• 11:26
  easy process. We have to go through anti money
• 11:28
  laundering checks. We have to onboard you.
• 11:31
  We have to get authorization codes from the HMRC which are
• 11:34
  still posted to our house by snail mail and we can't do
• 11:37
  anything until we've got that code and submit on your behalf.
• 11:40
  You have letters of engagement to sign.
• 11:42
  There's so many different steps to onboarding a client to a
• 11:45
  bookkeeping and accountancy practice that actually if you
• 11:48
  wait until the end of December, you're going to struggle to get
• 11:50
  the January deadline. And we do have them.
• 11:52
  I have them every January, usually over Christmas.
• 11:55
  So in December, we end January, people panic and they come and
• 11:59
  they're like, oh, and then the price is higher because we have
• 12:01
  to rush that. So then there's a, a price for
• 12:05
  almost like an extra charge because we're going to have to
• 12:07
  move other jobs around and try to prioritize yours, which means
• 12:11
  it's going to cost more. So let's not do that and let's
• 12:14
  get it done now, nice and easy because the businesses that stay
• 12:17
  calm and prepare early will glide through this change to
• 12:20
  MTD. It they'll be confident.
• 12:22
  They won't have to worry about it.
• 12:23
  They'll either have somebody like us at ABCSUK in their
• 12:25
  corner or they will fully understand what they've got to
• 12:28
  do. The ones that wait until March
• 12:30
  2026, not so much. The first quarter is April to
• 12:34
  June 2026. Was submission by the 7th of
• 12:36
  August 2026 similar to how the VAT works now?
• 12:40
  I know full well that August 2026 is going to be one of the
• 12:43
  busiest months in my practice because we have capacity for new
• 12:47
  clients, which means that our new client list is going to be
• 12:49
  huge. We're going to have a waiting
• 12:50
  list in place for those that are having that last minute panic
• 12:53
  despite the fact we're talking about it years ahead.
• 12:57
  I know business owners that still don't think this is coming
• 12:59
  into force because it's been delayed so many Times Now.
• 13:03
  I understand that. I understand the the fear.
• 13:05
  But if you take anything from this podcast, from this episode,
• 13:08
  it is happening. It is happening and I don't want
• 13:12
  you to fall behind. I don't want you to have the
• 13:14
  extra stress. A business owners, we have
• 13:15
  enough. Get prepared now.
• 13:18
  Let's get it done now and let's get you ready for MTD so that
• 13:22
  it's just another process you have to go from.
• 13:25
  And if you're doing it alone right now and you start to
• 13:27
  instruct someone to support you on a monthly or quarterly basis,
• 13:31
  you're going to feel so much better.
• 13:32
  You're going to feel so much freer.
• 13:33
  You're going to have the weight lifted off your shoulders.
• 13:35
  It's going to make you more productive, make you more money,
• 13:38
  and help you to build a Better Business.
• 13:40
  I'll get off my soapbox now. Don't forget that actually
• 13:43
  having MTD, it will help you make Better Business decisions
• 13:45
  because you'll have real numbers, real data, and that can
• 13:48
  only help you in your business. I also want to clear up a few
• 13:51
  things really quickly. If you're saying I only do a bit
• 13:54
  of Airbnb, it won't apply to me. If your total income is over
• 13:58
  50,000, then you're going to be included.
• 14:02
  If you're going, it's fine. I'll just use my spreadsheet.
• 14:04
  We'll know. The HMRC will require digital
• 14:06
  links between data and submission.
• 14:08
  Spreadsheets alone won't cut the you're still going to have to
• 14:10
  learn bridging software and how to do that and how to submit
• 14:13
  that data from your spreadsheet into the bridging software to
• 14:16
  the HMRC. Why have the admin burden find
• 14:20
  software now? Get used to that software again,
• 14:24
  going to help you in your business, make you more
• 14:26
  profitable, make you more productive, make you more
• 14:28
  efficient. You're saying I'll deal with it
• 14:31
  when it launches. Then you're going to miss the
• 14:33
  first quarterly deadline before you know it.
• 14:35
  And then you're going to have fines and penalties.
• 14:37
  And then you're going to come to a bookkeeper and accountant with
• 14:39
  your tail between your legs because you're going to you're
• 14:43
  going to have an extra fine to pay.
• 14:44
  And nobody wants to pay an extra fine if they don't need to.
• 14:46
  Let's deal with it now. And another thing I've heard
• 14:49
  people say is it's just for landlords.
• 14:50
  Well, no, it's for all self-employed income over a
• 14:52
  threshold. That includes selling on Etsy,
• 14:55
  that includes Airbnb, that includes renting out properties.
• 14:59
  That includes your sole trader job if you're a hairdresser or
• 15:03
  even bookkeepers if they're a sole trader and run a
• 15:07
  bookkeeping practice and then rent out a house or have a
• 15:13
  cottage by the sea or something. If that total income is over
• 15:16
  £50,000 then they're going to be included too.
• 15:18
  Trust me when I say you'll thank yourself when you're not
• 15:21
  scrambling under pressure. And if you're not sure whether
• 15:24
  you're included, what tools you need or how to start, that's
• 15:27
  exactly what we help with at Abcsuk.
• 15:29
  So you can go to abcsuk.com, you can book a free 15 minute
• 15:33
  discovery call and we can talk through the best options for
• 15:37
  you. It may be a one off strategy
• 15:38
  session, it may be a power hour or it may be one of our MTD
• 15:42
  ready services. We'll get you sorted step by
• 15:44
  step, no drama and a real person helping you build your business.
• 15:49
  Next week on the podcast, we're going to talk about the
• 15:51
  company's house changes. Trust me, you need to know
• 15:53
  what's coming. Specifically if you are a
• 15:55
  director of a UK limited company, if you are a person of
• 15:59
  significant control, or if you're thinking about becoming
• 16:02
  either of those things, hit follow so you don't miss it.
• 16:04
  Subscribe and hit the notification bell on YouTube,
• 16:06
  like rate and review. I'd be really grateful if we
• 16:08
  could get the numbers up and push this out a little bit
• 16:11
  further. If you could just take 5 seconds
• 16:13
  to hit that five star, I'd be super grateful.
• 16:16
  So until next week, keep it simple, keep it smart and never
• 16:19
  underestimate the power of being prepared.
• 16:22
  I'm Stephanie and this was a three weeks podcast.
• 16:24
  I'll see you next week for the next one.
• 16:26
  Bye. And that brings us to the end of
• 16:29
  another episode of The Three B's podcast.
• 16:31
  I hope you found it useful and that you're walking away with
• 16:33
  some motivation, inspiration, or education to help you build a
• 16:37
  Better Business. Don't forget to subscribe, leave
• 16:40
  a review, and of course, connect with us on social media for more
• 16:43
  insights, tips, and behind the scenes content.
• 16:45
  Your next step in building a Better Business is just a click
• 16:48
  away. I can't wait to connect with you
• 16:49
  and I'll see you on the next episode.
• 16:51
  Bye.