Income specifically your total gross income from self-employment and/or property before expenses. So if you earn £60,000 in sales but have £40,000 in costs, it’s your £60,000 turnover that counts, not your £20,000 profit.

Yes, you can still use spreadsheets, provided they are compatible with Making Tax Digital (MTD). This means your spreadsheet must be linked to HMRC using MTD-compliant software (often called bridging software), and your records must be kept digitally without manual re-entry between systems. 

Late MTD submissions are subject to HMRC’s points-based penalty system. Each missed deadline results in a penalty point, and once the points threshold is reached, a £200 penalty is charged. 

Further £200 penalties may apply for continued non-compliance. 

Late payments, particularly for VAT, may also incur additional penalties and interest, depending on how late the payment is made.  No Payments are required for MTD income tax  

The penalty regimes for both Income Tax and VAT are broadly similar.

There is a 12-month soft landing period when a taxpayer first joins MTD for Income Tax. During this time, HMRC takes a light-touch approach to penalties, particularly for late quarterly updates, although deliberate or repeated non-compliance may still result in penalties.

To join Making Tax Digital (MTD) for VAT, you need to sign up with HMRC and use MTD-compatible software or bridging software to submit your VAT returns. 

The process involves registering for MTD through your HMRC online account, authorising your software, and ensuring your VAT records are kept digitally. Once signed up, all future VAT returns must be submitted via MTD. 

You are required to join Making Tax Digital (MTD) for Income Tax based on your income in a previous tax year, not your current or expected income. 

If your total gross income from self-employment and/or property exceeds £50,000, you will need to join MTD from the start of the following tax year. 

For example, if your income goes over £50,000 in the 2024/25 tax year, you would join MTD from April 2026. 

Yes under Making Tax Digital (MTD) for Income Tax, you will still need to submit an annual declaration. 

Instead of a single Self Assessment tax return, you will send quarterly updates throughout the year, followed by a final declaration after the end of the tax year to confirm your total income and tax position. 

Yes, you may be able to leave Making Tax Digital (MTD) for Income Tax if your income falls below the threshold. However, this does not happen immediately. 

HMRC bases your MTD obligations on your most recently filed tax return, so you may need to remain in MTD until your lower income has been confirmed. 

In general, you can exit MTD once your income is below the threshold and is expected to remain there, but this is usually assessed after you have submitted your tax return.