Making Tax Digital for Income Tax is approaching fast - are you and your clients ready? | The Indicator Podcast

Description

In this webinar, Indicator's experts Andrew Rainford CTA ATT and Rachael Brown are joined by special guest Robyn Milstead CTA to break down what advisers need to know as we head into the final countdown for MTD for IT.

We cover:

Who’s affected (and who isn’t)
Whether anyone can opt out
What quarterly updates really mean in practice
Penalties, deadlines and NIL submissions
Choosing software and supporting clients

Listen now for clear, practical guidance to help you prepare with confidence.

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Transcription

Andrew Rainford
Good afternoon everyone, thank you very much for joining us for this webinar on the MTD for income tax the final countdown. Don't worry, I've got no plans to break out into 80s' style song. On a serious note the first tax year that will be mandated into MTD income tax is just 38 days away by my count and I know firsthand that we're still getting queries from businesses and advisors alike around the detail. Hopefully we'll cover a lot of that today. We are running a Q&A at the end - any questions welcomed and we will try to get through them all. And as usual, we'll try to follow up if we don't quite fit it into the hour slot that we've got. For those of you I haven't met before, I'm Andy Rainford, a chartered tax advisor and one of the in-house technical editors here at Tax Essentials for Advisors. My role focuses on analysing legislative change, tribunal decisions, HMRC developments, so on and so forth. Most importantly, translating those into clear practical guidance for advisors working at the coalface. I'm really pleased to be presenting today alongside my colleague Rachael Brown. Rachael's also a chartered tax advisor and like me works as an in-house technical editor. Between us we spend our days immersed in tax legislation, Finance Acts, case law and HMRC guidance with the aim of making complex developments usable and relevant for practitioners. We're also delighted to be joined today by our guest panellist, Robyn Milstead. Robyn is a tax director at LKA Chartered Accountants where she has built her career specialising in self-assessment compliance. In February last year, she founded Accountants Therapy, a fast-growing WhatsApp community created to give accountants a safe and supportive space to navigate MTD for income tax and the wider pressures of modern practice life. Since launching the group, Robyn has become a leading voice in demystifying MTD for practitioners, reducing stress across the profession and championing collaboration over competition. She brings practical clarity, humour and humanity to to what can often feel like an increasing, sorry, an increasingly complex tax landscape. She's an experienced speaker, having presented at Accountex on behalf of the ATT, worked with TaxCalc on their MTD Basecamp webinar series, and she's scheduled to speak at FAB 2026. So we're very pleased to have her insight and experience with her today. Between the three of us, the aim is to give you a technically robust, but practical discussion, grounded in legislation, informed by what we're seeing in practice, and focused on what it means for you and your clients. So Robyn, hello and welcome. I hope I've done your experience justice there. So to start, shall we row back a bit and look at why MTD for income tax is happening? What's the rationale?
Robyn Milstead
Sure. First of all, thank you very much for having me today and hello to everybody. So why is MTD happening? There are two real reasons that HMRC have said that MTD is happening. The first one... is because they are convinced that there is a tax gap that happens because of errors in people's tax return, because of poor bookkeeping standards. That is a hotly debated topic among accountants, particularly in accountants therapy, as to whether or not really putting people onto bookkeeping software, for example, will solve that tax cap. But that's certainly what HMRC are selling us as the reason for MTD. The second reason is because at the moment, everybody's tax files at HMRC are based on a very old computer system, something called Caesar. And the intention is that MTD will help with the migration over to the new computer systems. So how you'll see that translated in practice is that at the moment you see everybody on the OSA, the online services account. They are being migrated over to what's known as the agent services account. those that deal with VAT will already be
Rachael Brown
familiar with that agent services account so it's that migration of clients from the old computers to the new computers so one question that keeps popping up is uh how do i know which clients are going to be affected can you run us through that entry criteria please robin of course i can so in
Robyn Milstead
terms of who's going to be affected for april upcoming so april 2026 It's a case of having a look at the 24-25 tax return and assessing whether the qualifying income on that tax return is over the threshold, which for April 26 is £50,000 of qualifying income. In future, we'll be looking at reduced qualifying income thresholds. So on the 25-26 tax return, we'll be looking at a £30,000 threshold. And on the next tax return, it goes down to £20,000 for mandation April 27 and April 28 after. but in terms of working out whether your client is going to be caught by MTD we we want to understand what that qualifying income is. So we're going to look at the 24-25 tax return and essentially we're going to look at the gross income from, so the turnover, from any self-employment or self-employments and the gross income from any property. So that is UK property and or any foreign rental property as well and we're going to combine all of those sources. So if somebody is a landlord and self-employed at the same time we're going to come bind the gross receipts from those to work out whether or not their qualifying income is out over that threshold of fifty thousand pounds for the April 26th mandation. In practical terms most people will be using software that allows you to have a look and segment the client so pull off a report to be able to have a look at the qualifying income sources and make sure to have a look at whether or not it's under or over 50,000. So use that software if you have it. And then it's a case of getting into action and contacting your clients.
Andrew Rainford
Absolutely. Yeah. And doing that sooner, the better, really. What about clients that I mean, I know I speak to a lot of advisors and they're saying that they've got clients that are saying, look, can I get out of this? Who can who can be exempt? So are there any exemptions or exceptions?
Robyn Milstead
There are, but they're quite tight. So it's really important to understand with MTD that the exemption, there's no exemption for I don't want to do this or I don't like doing this. Unfortunately, a bit like tax in general, isn't it? But there are some people that don't have to comply with MTD. And remember that MTD is also is not just about your reporting requirements. It's about keeping digital records. So although there is more compliance with MTD, it needs to be underpinned by the record keeping so it's about who can't comply with the record keeping more than who can't comply with the extra compliance that MTD brings but essentially we have some automatic exemptions i.e people that will HMRC will know are outside of the scope of MTD for example non-residents and this is this is kind of a fun one because if you have a non-resident on a 24-25 tax return, they will be automatically exempt. provided that we expect them to still need non-resident pages for their 26 27 tax return um we also have some exemptions for those who had trust income for 24 25 now that doesn't work in the same way that one it or at least at the moment with the guidance says that you don't have to expect to have that on 26 27 it's enough just to have a trust income on your 24 25 tax return Also, personal representatives if someone has died. So somebody who has died is exempt from MTD, which always makes me laugh with that one, because that's one way of getting out of it, isn't it? It's an extreme way. There are other exemptions available, but you need to apply for them. So they're more the ones that we're looking at who actually it's not practical for to do the digital records. And the guidance tells us that these are people who are perhaps elderly, ill or have a disability, or people who have practically no access to the internet or potentially don't have the tools to make digital records or that it would be impractical for them to acquire the tools and learn the tools. That can be very broad in practice. You could have a very elderly client who is perfectly able to keep a digital record so therefore they potentially wouldn't be eligible for an exemption and vice versa you could have a younger person who is eligible because they just cannot do it for whatever reason. In terms of the type of exemptions that we've seen agreed with HMRC and the exemption agreement rate is pretty high at the moment so the number of exemptions that are going in yeah there's not too many being rejected some come back with a request for extra information. I've submitted two exemptions for two of my clients and had them agreed. One of them was on the basis of ADHD and dyslexia and that was agreed and there was some interesting bits on that in so much as my client wasn't formally diagnosed with either of those conditions and I wasn't asked to provide any formal diagnosis but I would suggest that that might be something HMRC tighten up on in the future. And then I also have a client who is an outside worker who hasn't got access to digital tools for the vast majority of the time. And to be honest, I was surprised that HMRC agreed that one, but they did. We've also seen in accountant's therapy, a few come through for old age and disability. So we had one example of somebody with Parkinson's who's had an exemption agreed. Sounds like the landscape is pretty reasonable at the moment for that, which is really good. That's exactly what we would want to see, isn't it?
Andrew Rainford
Yeah, definitely encouraging.
Rachael Brown
So, Robin, what happens if a client is in MTD because they have the relevant income in 24-25, but then that income source stops in the current tax year, so just before they're about to? go into MTD they no longer have that income.
Robyn Milstead
Sure that's one of the hottest topics and the most common question that I'm hearing at the moment what happens if you've ceased before mandation. If you've ceased before mandation you do not need to comply with MTD there you haven't if as long as all of your qualifying income has ceased before you are mandated so when your 24-25 tax return all of that that made up your qualifying income has stopped before the 6th of April this year, then you don't have to comply. And there are three routes to notify HMRC of this, and they all have their own little consequences. Now, the first route and the route that you may hear other people talking about at the moment, because it was one that's more well known, is to register that client for Making Tax Digital, to use the ACER account to go in and register the person. Then once they're registered, you have access to their qualifying income sources and you can notify the cessation of those income sources. And then that record will just sit there and you can see that HMRC has been notified. So the benefit of doing that is that you don't have to talk to anyone or try and talk to anyone at HMRC. You've got also a nice audit trail of what you're doing. The downside of that is that part of the process of signing somebody up for MTD. includes agreeing to put them into the new penalty regime. So that applies in this circumstance as well that they would be brought into the new penalty regime if you were to register them and then effectively deregister them. They're still in the new penalty regime. For some clients that will not be a bad thing. The new penalty regime works from a points-based system so you may well weigh it up and say this is quite good. Many agents feel quite nervous about doing that because the new penalty regime brings in potentially harsher penalties for long-term non-payment of tax which of course as agents is the one or one of the bits in the process that we can't control so personally I've always said I wouldn't put my clients into beta testing because I didn't want them to be exposed to the new penalty regime because I don't have control of their payments and I don't want them to come back and say Robin you put me you put me into this scheme earlier if I had not been signed up for this then I would have had a less penalty if I if I paid on the same terms etc so it's just something to consider for some clients that will be a benefit and the new penalty regime and some it won't and agents will have to decide their approach if you're not comfortable with the thought of signing up your client to the new penalty regime but you still want to notify cessation there are two other options one is to write a letter to HMRC and we were assured that if you do that eventually a letter will come back to confirm that they've received it and that you've notified the cessation. The other route is to give them a call and you give them a call on the agent dedicated line and you ask to go through to the MTD dedicated team and notify them via the phone. The downside of that other than as we said having to contact and speak to HMRC is not a two minute job is it? The downside is that at the moment, we're not sure of what happens after you've notified that. There hasn't been any confirmation that you would get a letter. I have raised it with HMRC myself and said there is absolutely no chance that I would leave it to somebody on the other end of the phone to note the file correctly and me think that that's a good idea. And then. waste time down the line having to follow that up and say I promise I did make a call and here's my notes to me this is that is ridiculous but we are pushing as a as a community for there to be a letter sent based on a phone call and I believe some of the professional bodies are also asking for that too or I hope they are and I'll be in touch with the CIOT about it as well I think um so yeah there are the three routes it's something that that's not my favorite thing about MTD when you've got lots of choice and lots of things to consider but that is definitely one of them but in theory yes if somebody has ceased all their qualifying income as long as they notify HMRC of the cessation they're out excellent and
Andrew Rainford
I suppose on a related topic then so if we were in a similar situation but rather than ceasing they say the clients downsized the trade or the the property portfolio so again if we assume we've got income above the threshold in 24-25 but the income's dropped in the current year 25-26 to say 25,000 is that enough to put off registration or is it a case of tough this is one of the ones that catches everybody out so that's a case of tough um
Robyn Milstead
you have to cease all of your qualifying income before mandation to be brought back out of MTD for it to not apply to you so even in the case that your safety. in a situation where your sole trade was 51 000 pounds of turnover you're mandated and it dropped because for example and it doesn't really matter the reason but to illustrate it say you get sick or your partner gets sick and you need to look after them and so your turnover absolutely tanks and you've got two thousand pounds a year because that was part of your qualifying income that's gone over the threshold, you... still are mandated for MTD and would still be expected to keep digital records and submit quarterly updates and your final return under the MTD system. That is catching everyone out. A little bit extra on that is that the best way to think of this is in terms of what made up my qualifying income that is mandating me. Because you can have the same sort of question when somebody starts a new trade before they're mandated so say in that period you're still doing a little bit of whatever you did maybe maybe you're a plumber but then you've had to had to really reduce that you're still doing it but you've had to reduce it and and in the meantime you've decided that actually you want to go and be an artist a different trade the plumbing one that was part of your qualifying income is going to be mandated but your new trade in the meantime wouldn't be you can voluntarily register that bit but because it for that year wasn't part of your qualifying income it's only going to be that bit is only going to be brought into mtd once it is part of qualifying income that exceeds the threshold once you're in mtd you're in for at least three years and your your income would have to drop below threshold to
Andrew Rainford
then be be able to come back out again that's quite interesting in that circumstance then so you've got one new trade that isn't mandated you're going to have to do an annual confirmation and a tax return.
Robyn Milstead
No. So once you're in MTD, your tax return, your final process would be via compliance software. So via MTD.
Andrew Rainford
So it's just the quarterly reporting that wouldn't. Yeah. OK. Fair enough.
Robyn Milstead
Yeah. So you'd have to add the other sole trade at the year end. There are some schools of thought that would say that it makes some sense to register the new trade under MTD so that you're doing everything in the same way. but again that's going to be very client specific and agent specific as to what the most practical thing to do is okay well it's going to be so complicated to um to keep track of isn't it in that sort of situation yeah it is um so in in practice how will the quarterly updates work sure so the first thing to understand about the quarterly updates is that they are i don't like quoting hmrc but they are light touch so they're not Chicks. really to be fully accurate they essentially are there to show that there is a digital record being kept regularly um those quarterly updates are due a month and seven days after the end of each quarter and they can be done they can be done either to on a calendar year basis or a tax year basis so either to the the end of a month of the quarter or to the fifth um the deadline is still the same it would be the seventh after seventh the month and seven days after the quarter end And you can do those quarterly updates using two different systems. You can either use something called bridging software, and that's suitable for clients that want to continue using a spreadsheet. And bridging software is essentially another type of spreadsheet that links your or your client's spreadsheet to HMRC. They tend to be very easy to use, quite cheap to use. The downside being that when you're using a spreadsheet, you may not be getting all of the information that. could benefit you or your client from using bookkeeping software that's a hotly debated topic i'm a spreadsheet girl don't tell anyone um but uh you're also going to have to remember that's bridging bridging software in itself doesn't have year-end functionality so you would also have to look at what's going to what's going to happen at year end that will be particularly um important for any agents that are using the government gateway to file the end of year process because that government gateway is not going to be there anymore for those under MTD. So bridging looks nice and shiny, but you would also have to consider your end of year process. Otherwise, you can submit the quarterly updates using compliant MTD bookkeeping software. So these are the ones that pull in a bank feed and you do the bookkeeping and some numbers spit out nicely at the end as if... by magic of course we know that that is not true there has to be some bookkeeping done essentially the quarterly updates are um again like i said light touch they're not something to get really stressed about um what what is interesting is that um we've yeah we've we've got to be careful as agents in so much as um the pcrt so the professional standards that we need to abide by do say. that you can't just submit any old rubbish. So I was definitely one of the agents, sort of like this time last year, going well I'll just submit nil for everybody because what's the point? And the point is because the PCRT tells us that we have professional standards and we must be trying to submit something that we feel is at least a sort of accurate position of what the client has experienced in that quarter. So, In terms of what you're actually going to report, you're going to report the income and the expenses of just the qualifying income. So just trade and rental for trades under the VAT threshold. You can choose to do three lines. You can also choose to do full accounting. Some of that depends on the software that you're using. Some software doesn't offer three line options. So just make sure you understand what software you're using and what it does before you choose it. And... in terms of rental there is an easement on those quarterly updates that joint rental income can be reported without any expenses so that's really there because HMRC recognised and the professional bodies told them that they needed to recognise that for the reality of some joint owners of property one of them might do the record keeping and the other one might have absolutely no idea until the year end so it's really there because of that kind of circumstance. So that's only for joint properties. So if you have some that are joint and some that are not, your quarterly update will have some expenses on there because you're going to have some expenses from there. They're not joint ones.
Andrew Rainford
I've had a question in the Q&A actually that I think I'll bring in now rather than the end because it's what we're talking about. Actually, the first bit I think we covered before. But this person's asked, so if somebody ceases mid-year, what do they do?
Robyn Milstead
can they avoid further submissions for the rest of the year the quarterly submissions that is yes so they would notify cessation um and then whichever quarterly update covers to that cessation would be the last one excellent okay um so i
Andrew Rainford
guess we should we should ask something that a lot of people are going to be wondering and worried about perhaps but in terms of penalties um are they starting straight away um or have we got like we did with vat um when we had mtd for that. Have we got any kind of concessions for the first year?
Robyn Milstead
We have a soft landing for the first year. And that soft landing means that there won't be any penalty points for late quarterly updates. Only the quarterly updates for the first year. There will be penalty points for late submission of the final tax return, but not for the quarterly update. So that gives us a little bit of breathing room. What's interesting is that a soft landing doesn't stop. the legal requirement to have digital records. So there is still a fine associated with not keeping up with your legal obligation to keep the digital records, but one would assume that that's going to be
Andrew Rainford
um not too eagerly pursued by hmrc in the first year because they have no way of telling whether you're keeping a digital record if they're not bothered about having the quarter just clarify something because i thought i read something the other day and i meant to make a note to ask you about this on exactly this point so soft landing for the first year but that's the first year of mcd it's not necessarily the business's first year is it as
Robyn Milstead
it stands as it stands that's correct so it is just for the April 26 cohort. at the moment I I have my suspicions that we may see a soft landing for everybody's first year just in terms of agent workload um the soft landing I've I've written a fair amount on this because when the soft landing was first announced I was really upset about it um I think morally it's the right thing because I don't think anybody has is really ready particularly unrepresented taxpayers I think it would have been morally wrong to have see them racking up penalty points on a system that they don't know anything about. But from an agent point of view, we've spent lots of time telling our clients, you've got to do this, you've got to do this, and we're going to charge you for this. And then all of a sudden, the system that clients think, why am I doing this anyway, also has no stick attached to it. From an agent point of view, it's quite a tricky position to have to then go to the client and say, you sort of have to do it, but you kind of don't. And I kind of also want to charge you if I do do it for you. It's not very nice. landscape plus the thought of that next year when we also have the 30 000 cohort which for many agents is going to be significantly more than we have in the 50 000 um we're essentially having two sets of clients go live at the same time i don't like that and i would be surprised if the again the professional bodies aren't lobbying to help us with that um as the thresholds decrease the percentage of taxpayers that use agents get higher as well so the agent community voice should get stronger and um yeah i i really i i obviously i have no bombshell i can't tell you yes there's gonna be some soft landing next year but i would be surprised if it's not considered but
Andrew Rainford
don't bank on it um now just clarify another question um so the quarterly updates i know you explained that they're quite um like a light touch they're not tax returns are they
Robyn Milstead
they're not tax returns and that's something that you'll see if you're on social media. Everybody likes saying oh there's five tax returns to do, there's lots of mini tax returns, they're not and I'm all for saying I hate MTD etc and bashing it but we want to be accurate about the whole system and it's really important to make that distinction between tax return which has different legal consequences for example there are penalties associated with inaccuracy on a tax return. That's still the case under MTD. For the quarterly updates, there's no penalty associated with inaccuracy. So that is such an important distinction. And if you see people saying that it's five tax returns a year or more, some people talk about more, it might be worthwhile me telling you about why some people might say it's more than five. And now it's not five tax returns, but you can end up reporting more than five things so the quarterly updates are the sum of their parts is the best way to describe them you'll anybody that has a sold trade and for example a UK property or more than one UK property essentially they're making two quarterly updates a quarter so you you might see people saying more than five because it's not really just four quarters it's eight quarters plus your end one in that kind of circumstance and that can be multiplied so if you have more than one trade you're making more than one submission so if you have someone that has two trades a UK rental property and um and foreign print foreign property is also potentially more than one submission because it will go by jurisdiction so if you have someone that has 10 properties across the world then that's 10 different parts to make up the one ported update. It can get really busy really quickly. Where those figures get quite fun to look at is if you have a look at your client base and you say, OK, well, I've got 300 clients at the moment, that 300 submissions. If you then break it down with how many are mandated and go, OK, well, this person has a property and a trade. Now I've got to add eight to that a year. Those figures look really funky. So that's why you might see some people. talking about lots and lots of submissions. They are and they aren't. You're always going to have one quarterly update and a quarter, but to make that quarterly update complete there might be more than one income source to consider. Okay. And sorry, one extra point on that. It's kind of important to think of it that way because you can be using different software to submit the different income sources. That's essentially why there's that distinction.
Rachael Brown
Okay.
Andrew Rainford
So when MTD was first announced, it did seem like they were trying to bring the payment of tax closer to when it was earned, similar to when we had basis period reform. So does the quarterly reporting change the tax payment deadline on these specific sources of income?
Robyn Milstead
No, there's no change to tax payments at the moment. So tax payments exactly the same as we used to. Payments on account stay the same. they're calculated in the same way, same payment deadlines. There is a lot of suspicion that that will change. It's difficult to see why this wouldn't be associated with tax payments. I think a lot of agents would have found it more palatable if actually they had said it was related to tax change or tax payment change, even if they said not immediately 10 years down the line. But the official line is no, no change.
Rachael Brown
Excellent. One thing that's sort of just popped into my head there is the not tax returns. Now, when you submit a tax return, obviously, if you haven't got all the information to hand, you can submit with provisional figures and correct later on. So what's the situation with quarterly updates if your client hasn't sent the information? I mean, could you, for example, submit a nil return and then return to it later on?
Robyn Milstead
you know correct the position in theory yes in practice as I was saying before with the nil returns it's a matter of the the professional conduct rules that a client may well get away with submitting something completely ridiculous and and estimated but those of us who are bound by the PCRT, we... should not be doing that or at least we should be trying not to do that is really what the PCRT says is that it's not a case of just going oh well doesn't matter we need to get to a place where we've done as much as we can to make it as accurate as we can and I dislike that because it's very ambiguous isn't it but at the same time I think the point of the PCRT being that way is because they acknowledge that... we may well have those situations where we just can't get hold of the client and i think i would be really considering not doing a nil return for a client as i said i used to think what what the hell i'll just do it i i think i've changed my position on that and i wouldn't be comfortable doing that there is you know you've also got to consider if you've got a client that you just that just can't be contacted one they possibly have grounds for a an appeal against a penalty point if they're ill if that's why they haven't been responding to you and two there is also a practical point of you know if your clients don't respond that's why there are penalty points there because there has to be a stick there for them not complying and if we're doing everything that we can then perhaps sometimes we have to allow our clients to be non-compliant because they're not playing ball with us um It is a tricky one and I think this is one of those things where when we get rolling with MTD, we will start to understand more about at what point do we feel comfortable submitting something submitted. Ultimately, again, there's no penalty for inaccuracy and these quarterly updates are cumulative. So what actually happens is that if you submit something fairly estimated for Q1 and then eventually the client actually gives you the information that you were waiting for, If by the time Q2 comes along, all you're going to do is update that via the Q2. So the Q2 is going to give you the cumulative position and you're happy because then by then everything is correct. Definitely, that's something that we're going to see more as we get rolling on, though.
Andrew Rainford
It does. It does seem like there's still going to be a bit of a mad rush at the year end, doesn't there? Because if there's no there's no tax payment partway through. then they can just say I'll chase up that expense at the end of the year when I need to.
Robyn Milstead
Yeah so really we want to see the Q4 be correct or as correct as possible before tax adjustments. So the quarterly updates don't have any of your, they don't have to have any of your tax adjustments. You can submit them with tax adjustments if you want. I think that would, most people would find that probably overkill to do that every quarter. But that's your prerogative if you want to do that. So... Yeah, we would want the Q4 to be in a position, hopefully, where we're just doing tax adjustments at the year end. But exactly this, we don't really know, do we, until we get started, how our clients are all going to react. And it's fine. Lots of people are testing, but once we are live with such volume, that's when we're really going to see that diversity of what clients send and what practical things we actually have to do to make this work.
Rachael Brown
Excellent. Somebody just asked on what we were just talking about there with the quarters. Hypothetically, could you just record the income for the first three quarters and then put all the expenses in in Q4?
Robyn Milstead
Hypothetically, you could. But again, it goes back to the PCRT that the quarterly updates are designed to have the expenses in there. So as advisors, we should be putting those expenses in.
Rachael Brown
Yeah, I guess it's a question of best practice as well, isn't it?
Robyn Milstead
It's exactly this.
Rachael Brown
Yeah. So you mentioned bridging software before. Is buying special software mandatory, be that accounting software or bridging software, or if so? how would you advise clients and their advisors to go about choosing a suitable package?
Robyn Milstead
Software choice has to be one of the most difficult parts of MTD, in my opinion. You have to have compliant software and you can find out which software is compliant by going on to HMRC's MTD tool. So just be careful. I've seen, I'm sure it won't happen to us as advisors, but I've definitely seen some of my friends who are not tax people going and Googling HMRC compliance software and they get the general self-assessment list, which is enormous. So just be careful that you're looking at the MTD one. And you can also have a look at which softwares are in development too. In terms of choosing software, it's going to be really individual per practice. and potentially per client. So myself, I've approached this a little bit on a practice basis. So I work for a company called LKA Chartered Accountants. We're a zero practice. So in the first instance, I know that we can give the most support to our clients, potentially on zero. But I haven't forced all of my clients to use that route. A lot of my clients are going to stay on a spreadsheet because for me, I know that they're doing a good job of that spreadsheet. I know that they're getting all the information that they need from that spreadsheet and that using bookkeeping software is not going to add an awful lot to their life. They're not people that are growing their businesses. They're not people that particularly want to learn a new system. And I think that that's completely legitimate. So I've given them the option of bridging software. And I'm going to obviously be there at the year end. So I'm going to use my software that's compliant. to file their year end. How can practices choose? It's unfortunately a case of investing the time to look at what's out there. It's very likely that you'll already have some idea of what you're going to use by now unless you are an advisor that has literally just been using the government gateway and nothing else and spreadsheets then that's going to be an uphill battle for you because because you really do need to choose what you're going to use. But, um, Have a look at what's out there. I've been surprised. So as part of Accountants Therapy, we've been running demos across the last couple of weeks and on into March as well with compliant softwares to find out what they do, what they're going to offer roadmap wise. And I've been really surprised at some of the things that are out there. Some companies that you've just never heard of are now coming up and building these softwares because there's a market out there and some of them look great. And that's. again as I said I'm a spreadsheet girl so for me to say that bookkeeping software looks great is quite something. Yeah unfortunately I don't have a quick fix for how you can choose your software it's very very individual to each agent and it's very individual to your client base but what I would suggest is don't just let your clients go out there and choose that's a mistake that I made last year and told in my enthusiasm to tell all my clients about MTD I went go and have a research yourself and aside from everybody choosing a particular software that I don't really like and me now having to learn it, I've now got a variety of softwares that I'm now going to have to learn. So maybe the best bit of advice there that I can give from what we've seen in therapy is to narrow down your choices where you can, find things that you think you could work with and then give your clients. you can give them just one option that's the low stress way or give them two or three options some really good advice thank you no worries so in terms of what we do now should advisors be registering their
Andrew Rainford
clients or will hmrc just put them into MTD based on their plus tax return?
Robyn Milstead
I love this question. So there is an emphasis on agents registering their clients and if you ever ask HMRC what they will do if nobody registers a client they're really shady about it. The answer is that they will eventually sign up your client for you they will We don't have a time scale on that. Previously they've said something like around August, September time, so potentially after the first quarterly update. Before there was a soft landing, that was obviously of concern and that would be motivating for us to register our clients because we don't want them to get a penalty point when they're eventually registered and you go, whoops, I should do the first quarterly update. Now with a soft landing, you could well go, oh, who cares? I'll just let HMRC do that work for me. That's not actually advisable. As I said at the start, one of the reasons for MTD is to move the clients from the old system to the new system. And part of that is a data migration. And what's happening when you register your client is you have the opportunity to review that information that's being migrated and to update it if necessary. So although there is the safety net, if you like, of HMRC eventually signing people up if necessary. it's not advisable as agents it's definitely the better way round to sign your clients up the registering process itself hmrc say takes about four minutes to be honest i've done a fair few of my clients this week and i don't think it's a four minute process i think it's a shorter process than that happily so and it's worth it just having a quick look at what gets pulled through and what HMRC are expecting. I've only had... one client where I've had to add an income source because it wasn't already there. For me everything else has been correct and the information has been good but the thought that you would start this client off on a system that has bad information it's definitely more worth your time doing it. Some people charge for that so I've been charging my clients a bit of an admin fee £25 for me to register them unless we're doing the quarterly updates and then I've said I'll waive that charge. um across therapy we've had a real mix of people going well i want to own that process so i'm not going to charge because it's really me that wants to do it and there's also been people saying i'm going to i'm definitely going to charge more because you know i'm doing work for the client so therefore i will charge so um yeah you should register your clients is my professional opinion on that yeah um i think one more from from us and then we'll move on to the q a um
Rachael Brown
Where should advisors and their clients separately go if they need more support? Presumably there are different guidance depending on whether you're the business or whether you're the advisor.
Robyn Milstead
Sure. So taxpayers direct should go to their agents, shouldn't they? I couldn't say anything other than that. Otherwise, HMRC have a toolkit out there which is fairly comprehensive. and at least going straight to HMRC, you're not going to get the inaccurate information that... that you could get off of TikTok or Instagram. So always the little warning there for anybody, just be very careful what you see online. I see an absolute crazy amount of misinformation out there and it's now become my mission to get rid of all of that. So don't be like me because you kill yourself in the process trying to get rid of all that misinformation. Go straight to a reputable source. So for advisors, a reputable source is you can go to HMRC no not not many of us love doing that but your professional body is definitely going to be a good source there the ATT particularly have some amazing resources that are written in a way that most people can digest and find exactly what they want otherwise just a little plug for accountants therapy for us it's been it's been literally a year of talking about MTD and covering all the questions and therefore we're a really knowledgeable bunch of people. It's only by having those conversations that I can come and do something like this and feel confident knowing that well let's see that I can answer the questions we'll see if I can answer all the questions. But yeah we would be very happy to welcome anybody here that fancies finding a community of people that they can bounce questions off not just across MTD but across practice in general. And if you don't mind, I'll just say if you go to accountancetherapy.co.uk forward slash join slash now slash, you can have a month free of membership. So, yeah, there are resources out there. Just make sure you're using something reputable.
Rachael Brown
Absolutely. And speaking of reputable, we will be, I believe, sending out some additional resources when we send the recording of this webinar out for the attendees as well. Okay. Well, I think that's it for the formal session. So I'm going to open the floor for a Q&A. I'm going to bring Rachel back on screen so we're all here. We have got a couple. We've covered some of them as we've gone along. So there's one quite specific one here. So I'll start with this one because I suspect it'll probably be quicker to answer than the other. So if someone's got a client that's over the threshold for 24, 25, so they're over 50,000, ceases trading in the current year, 25, 26. But they've also got property income of, say, 12,000 pounds a year. Would they be stuck in for the three years that you mentioned earlier on the basis of the rental income?
Robyn Milstead
Yeah, so again, it's looking at what has made up the qualifying income that's breached the threshold. Is any of that continuing? If any of that is continuing, that bit is part of MTD. So even if it's lower than the threshold, even if it's very, very low, it's still going to be, that bit is going to be mandated.
Rachael Brown
Would that be the case if it was under the property allowance? Yes.
Robyn Milstead
So it depends what you've reported on your return previously. So if you've got other income, so if somebody, that's a really good question. The straight answer is yes. The straight answer is yes to that because usually you would claim your trading allowance or your property allowance in your end of year return. So the fact that it's made up, when you're doing a tax return, if you've got other income that makes sense. that you're reporting on your tax return you still have to to report the up to thousand pounds of a trade or not you can't just leave it off of your return so yes sorry that's i'm answering that badly let's go back to the start yes it would yeah wrong for the jury but what you can do so what you can do with that is you could choose if you know it's going to be under the trading allowance of the property income allowance you could choose to put 250 pound of expense each time
Rachael Brown
Yes. yeah so it was a like effectively netting off and then you've not got to do so much heavy later on and what about i suppose just while we're on that subject because i'm my brain's going as you're as you're answering i think what about rent a room income because that's not really a property business is it it's uh yeah it works again the same as the
Robyn Milstead
property income etc so um yes that would still if that's on your return and it's made up quarter of qualifying in it's made call of a part of your qualifying income then yes that's going to be also part of it and again you could choose to offset some of the rental rooms during the year or at the or at the year end i think most people prefer to do it a year end because or maybe in theory you're supposed to keep a digital record of your actual expenses there as well so that you would be able to choose between the two yeah i guess it's almost like a notional expense isn't it as you're going along because i guess if if
Rachael Brown
if it's supposed to be giving you an idea of your end of year tax position as you're going along you'd want to be knocking it off as you were going along to get as accurate a picture of as possible yeah yeah um here's a good one here for you this is uh this is probably a head scratcher but you're you're the ideal person to answer i think find out um for firms that have got a large base of smaller um or less digitally engaged clients i think you hinted at this earlier What's the most effective transition strategy you've seen that works in practice?
Robyn Milstead
Getting your strategy right or set first. So thinking about how you can apply the same strategy across as many of those clients as possible would be the best thing that I can suggest. So again, back to software choice. having less choices will streamline the process better. There's also a really good point that was mentioned in one of the demos we ran last week about using the same end of year software. So some of the quarterly updates software will also do year end, but a lot of agents, of course, already have their systems for doing year end. So your tax calcs, your irises, your CCHs, etc. The danger of moving off of the tax cuts, the CCHs, your year-end process, and putting your doing the year-end process for clients in the various different bookkeeping software is that you lose the ability to have a centralized list of what what's happening with your client so you can't pull from one source and see what the qualifying income is for people so um for me i think it makes a lot of sense to centralize your year-end process somewhere um whatever software works for you um and to cut down as much as you can on what software choices you recommend to your clients and
Rachael Brown
i suppose one one from me because i imagine there are people out there that have got them but where you've got clients that just aren't having it you know you've been you've been speaking to them about it since it was first announced and you know their attitude is is that oh well it's not going to affect me um a couple of tips for for getting you know actually the
Robyn Milstead
horse to drink after you've brought this um we've had that same situation come up on on our group yesterday with someone that they think they could even get an exemption but they just will not engage um Yeah, which is really stressful. I think the first thing is to consider whether that person has got any grounds for an exemption. That seems to be a fairly good strategy that's being employed by a lot of people in therapy. At least Brian encouraged them to engage with looking at the exemptions and again, ask those questions like, have you ever been diagnosed with a learning disability? that that kind of question is a little bit awkward but might just get you that exemption and then the client is happy for those that just will not engage what would we do if they were just normal tax return clients eventually we would have to disengage unfortunately i think that is that's the thing it's more more than it is otherwise on that one um we are running a six-month course called mtd together that's free for our members um and our next one which is mid-March, is exactly on that topic. how do we get clients to engage and what do we do if they're not engaging? So just another shameless plug.
Rachael Brown
No, not at all. We haven't actually got, I think we've covered all the questions that are in the Q&A, so I'll just give it another minute in case anyone can think that they want to ask Robin while we've got her on. But, yeah, thanks, Mel, just pointing out as well that we're going to be at FAB 2006, 26 even. I don't know if we were there 20 years ago. So we'll see you there as well.
Robyn Milstead
Are you-
Rachael Brown
are you exhibiting there you haven't found i'm not i believe the the firm is are you going rachel i am yeah it's uh it's local for me yeah because you're down in the midlands aren't you there you go you'll be able to uh to go and say hello so no no no still no more questions so i think you you did very well there considering some of them were a bit i'm sure somebody can find something really difficult for me i have to be very quick because we've only got five minutes left but um Yeah, in fact, no, there's nothing been in for quite a while. So I think we'll call that done. But before we wrap up, I'd just like to say a couple of thank yous there. Firstly, to Rachel, it's been a pleasure co-hosting with you. And of course, to Robin for sharing your valuable insight and experience with us. You know, your perspective has added real depth to the discussion. And of course, thank you to all of you for joining us and for the engagement throughout your questions. We know how busy professional life is, so we really do appreciate you taking the time to be part of the session. We'll be planning our next webinar for May or June topic to be confirmed, but we'll be sharing details and how to register, etc. Very soon. And we'd love to for you to all join us again. OK, thanks, everyone, and look forward to seeing you next time.
Andrew Rainford
Bye.

Description

We cover:

Who’s affected (and who isn’t)
Whether anyone can opt out
What quarterly updates really mean in practice
Penalties, deadlines and NIL submissions
Choosing software and supporting clients

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Transcription

Andrew Rainford
Good afternoon everyone, thank you very much for joining us for this webinar on the MTD for income tax the final countdown. Don't worry, I've got no plans to break out into 80s' style song. On a serious note the first tax year that will be mandated into MTD income tax is just 38 days away by my count and I know firsthand that we're still getting queries from businesses and advisors alike around the detail. Hopefully we'll cover a lot of that today. We are running a Q&A at the end - any questions welcomed and we will try to get through them all. And as usual, we'll try to follow up if we don't quite fit it into the hour slot that we've got. For those of you I haven't met before, I'm Andy Rainford, a chartered tax advisor and one of the in-house technical editors here at Tax Essentials for Advisors. My role focuses on analysing legislative change, tribunal decisions, HMRC developments, so on and so forth. Most importantly, translating those into clear practical guidance for advisors working at the coalface. I'm really pleased to be presenting today alongside my colleague Rachael Brown. Rachael's also a chartered tax advisor and like me works as an in-house technical editor. Between us we spend our days immersed in tax legislation, Finance Acts, case law and HMRC guidance with the aim of making complex developments usable and relevant for practitioners. We're also delighted to be joined today by our guest panellist, Robyn Milstead. Robyn is a tax director at LKA Chartered Accountants where she has built her career specialising in self-assessment compliance. In February last year, she founded Accountants Therapy, a fast-growing WhatsApp community created to give accountants a safe and supportive space to navigate MTD for income tax and the wider pressures of modern practice life. Since launching the group, Robyn has become a leading voice in demystifying MTD for practitioners, reducing stress across the profession and championing collaboration over competition. She brings practical clarity, humour and humanity to to what can often feel like an increasing, sorry, an increasingly complex tax landscape. She's an experienced speaker, having presented at Accountex on behalf of the ATT, worked with TaxCalc on their MTD Basecamp webinar series, and she's scheduled to speak at FAB 2026. So we're very pleased to have her insight and experience with her today. Between the three of us, the aim is to give you a technically robust, but practical discussion, grounded in legislation, informed by what we're seeing in practice, and focused on what it means for you and your clients. So Robyn, hello and welcome. I hope I've done your experience justice there. So to start, shall we row back a bit and look at why MTD for income tax is happening? What's the rationale?
Robyn Milstead
Sure. First of all, thank you very much for having me today and hello to everybody. So why is MTD happening? There are two real reasons that HMRC have said that MTD is happening. The first one... is because they are convinced that there is a tax gap that happens because of errors in people's tax return, because of poor bookkeeping standards. That is a hotly debated topic among accountants, particularly in accountants therapy, as to whether or not really putting people onto bookkeeping software, for example, will solve that tax cap. But that's certainly what HMRC are selling us as the reason for MTD. The second reason is because at the moment, everybody's tax files at HMRC are based on a very old computer system, something called Caesar. And the intention is that MTD will help with the migration over to the new computer systems. So how you'll see that translated in practice is that at the moment you see everybody on the OSA, the online services account. They are being migrated over to what's known as the agent services account. those that deal with VAT will already be
Rachael Brown
familiar with that agent services account so it's that migration of clients from the old computers to the new computers so one question that keeps popping up is uh how do i know which clients are going to be affected can you run us through that entry criteria please robin of course i can so in
Robyn Milstead
terms of who's going to be affected for april upcoming so april 2026 It's a case of having a look at the 24-25 tax return and assessing whether the qualifying income on that tax return is over the threshold, which for April 26 is £50,000 of qualifying income. In future, we'll be looking at reduced qualifying income thresholds. So on the 25-26 tax return, we'll be looking at a £30,000 threshold. And on the next tax return, it goes down to £20,000 for mandation April 27 and April 28 after. but in terms of working out whether your client is going to be caught by MTD we we want to understand what that qualifying income is. So we're going to look at the 24-25 tax return and essentially we're going to look at the gross income from, so the turnover, from any self-employment or self-employments and the gross income from any property. So that is UK property and or any foreign rental property as well and we're going to combine all of those sources. So if somebody is a landlord and self-employed at the same time we're going to come bind the gross receipts from those to work out whether or not their qualifying income is out over that threshold of fifty thousand pounds for the April 26th mandation. In practical terms most people will be using software that allows you to have a look and segment the client so pull off a report to be able to have a look at the qualifying income sources and make sure to have a look at whether or not it's under or over 50,000. So use that software if you have it. And then it's a case of getting into action and contacting your clients.
Andrew Rainford
Absolutely. Yeah. And doing that sooner, the better, really. What about clients that I mean, I know I speak to a lot of advisors and they're saying that they've got clients that are saying, look, can I get out of this? Who can who can be exempt? So are there any exemptions or exceptions?
Robyn Milstead
There are, but they're quite tight. So it's really important to understand with MTD that the exemption, there's no exemption for I don't want to do this or I don't like doing this. Unfortunately, a bit like tax in general, isn't it? But there are some people that don't have to comply with MTD. And remember that MTD is also is not just about your reporting requirements. It's about keeping digital records. So although there is more compliance with MTD, it needs to be underpinned by the record keeping so it's about who can't comply with the record keeping more than who can't comply with the extra compliance that MTD brings but essentially we have some automatic exemptions i.e people that will HMRC will know are outside of the scope of MTD for example non-residents and this is this is kind of a fun one because if you have a non-resident on a 24-25 tax return, they will be automatically exempt. provided that we expect them to still need non-resident pages for their 26 27 tax return um we also have some exemptions for those who had trust income for 24 25 now that doesn't work in the same way that one it or at least at the moment with the guidance says that you don't have to expect to have that on 26 27 it's enough just to have a trust income on your 24 25 tax return Also, personal representatives if someone has died. So somebody who has died is exempt from MTD, which always makes me laugh with that one, because that's one way of getting out of it, isn't it? It's an extreme way. There are other exemptions available, but you need to apply for them. So they're more the ones that we're looking at who actually it's not practical for to do the digital records. And the guidance tells us that these are people who are perhaps elderly, ill or have a disability, or people who have practically no access to the internet or potentially don't have the tools to make digital records or that it would be impractical for them to acquire the tools and learn the tools. That can be very broad in practice. You could have a very elderly client who is perfectly able to keep a digital record so therefore they potentially wouldn't be eligible for an exemption and vice versa you could have a younger person who is eligible because they just cannot do it for whatever reason. In terms of the type of exemptions that we've seen agreed with HMRC and the exemption agreement rate is pretty high at the moment so the number of exemptions that are going in yeah there's not too many being rejected some come back with a request for extra information. I've submitted two exemptions for two of my clients and had them agreed. One of them was on the basis of ADHD and dyslexia and that was agreed and there was some interesting bits on that in so much as my client wasn't formally diagnosed with either of those conditions and I wasn't asked to provide any formal diagnosis but I would suggest that that might be something HMRC tighten up on in the future. And then I also have a client who is an outside worker who hasn't got access to digital tools for the vast majority of the time. And to be honest, I was surprised that HMRC agreed that one, but they did. We've also seen in accountant's therapy, a few come through for old age and disability. So we had one example of somebody with Parkinson's who's had an exemption agreed. Sounds like the landscape is pretty reasonable at the moment for that, which is really good. That's exactly what we would want to see, isn't it?
Andrew Rainford
Yeah, definitely encouraging.
Rachael Brown
So, Robin, what happens if a client is in MTD because they have the relevant income in 24-25, but then that income source stops in the current tax year, so just before they're about to? go into MTD they no longer have that income.
Robyn Milstead
Sure that's one of the hottest topics and the most common question that I'm hearing at the moment what happens if you've ceased before mandation. If you've ceased before mandation you do not need to comply with MTD there you haven't if as long as all of your qualifying income has ceased before you are mandated so when your 24-25 tax return all of that that made up your qualifying income has stopped before the 6th of April this year, then you don't have to comply. And there are three routes to notify HMRC of this, and they all have their own little consequences. Now, the first route and the route that you may hear other people talking about at the moment, because it was one that's more well known, is to register that client for Making Tax Digital, to use the ACER account to go in and register the person. Then once they're registered, you have access to their qualifying income sources and you can notify the cessation of those income sources. And then that record will just sit there and you can see that HMRC has been notified. So the benefit of doing that is that you don't have to talk to anyone or try and talk to anyone at HMRC. You've got also a nice audit trail of what you're doing. The downside of that is that part of the process of signing somebody up for MTD. includes agreeing to put them into the new penalty regime. So that applies in this circumstance as well that they would be brought into the new penalty regime if you were to register them and then effectively deregister them. They're still in the new penalty regime. For some clients that will not be a bad thing. The new penalty regime works from a points-based system so you may well weigh it up and say this is quite good. Many agents feel quite nervous about doing that because the new penalty regime brings in potentially harsher penalties for long-term non-payment of tax which of course as agents is the one or one of the bits in the process that we can't control so personally I've always said I wouldn't put my clients into beta testing because I didn't want them to be exposed to the new penalty regime because I don't have control of their payments and I don't want them to come back and say Robin you put me you put me into this scheme earlier if I had not been signed up for this then I would have had a less penalty if I if I paid on the same terms etc so it's just something to consider for some clients that will be a benefit and the new penalty regime and some it won't and agents will have to decide their approach if you're not comfortable with the thought of signing up your client to the new penalty regime but you still want to notify cessation there are two other options one is to write a letter to HMRC and we were assured that if you do that eventually a letter will come back to confirm that they've received it and that you've notified the cessation. The other route is to give them a call and you give them a call on the agent dedicated line and you ask to go through to the MTD dedicated team and notify them via the phone. The downside of that other than as we said having to contact and speak to HMRC is not a two minute job is it? The downside is that at the moment, we're not sure of what happens after you've notified that. There hasn't been any confirmation that you would get a letter. I have raised it with HMRC myself and said there is absolutely no chance that I would leave it to somebody on the other end of the phone to note the file correctly and me think that that's a good idea. And then. waste time down the line having to follow that up and say I promise I did make a call and here's my notes to me this is that is ridiculous but we are pushing as a as a community for there to be a letter sent based on a phone call and I believe some of the professional bodies are also asking for that too or I hope they are and I'll be in touch with the CIOT about it as well I think um so yeah there are the three routes it's something that that's not my favorite thing about MTD when you've got lots of choice and lots of things to consider but that is definitely one of them but in theory yes if somebody has ceased all their qualifying income as long as they notify HMRC of the cessation they're out excellent and
Andrew Rainford
I suppose on a related topic then so if we were in a similar situation but rather than ceasing they say the clients downsized the trade or the the property portfolio so again if we assume we've got income above the threshold in 24-25 but the income's dropped in the current year 25-26 to say 25,000 is that enough to put off registration or is it a case of tough this is one of the ones that catches everybody out so that's a case of tough um
Robyn Milstead
you have to cease all of your qualifying income before mandation to be brought back out of MTD for it to not apply to you so even in the case that your safety. in a situation where your sole trade was 51 000 pounds of turnover you're mandated and it dropped because for example and it doesn't really matter the reason but to illustrate it say you get sick or your partner gets sick and you need to look after them and so your turnover absolutely tanks and you've got two thousand pounds a year because that was part of your qualifying income that's gone over the threshold, you... still are mandated for MTD and would still be expected to keep digital records and submit quarterly updates and your final return under the MTD system. That is catching everyone out. A little bit extra on that is that the best way to think of this is in terms of what made up my qualifying income that is mandating me. Because you can have the same sort of question when somebody starts a new trade before they're mandated so say in that period you're still doing a little bit of whatever you did maybe maybe you're a plumber but then you've had to had to really reduce that you're still doing it but you've had to reduce it and and in the meantime you've decided that actually you want to go and be an artist a different trade the plumbing one that was part of your qualifying income is going to be mandated but your new trade in the meantime wouldn't be you can voluntarily register that bit but because it for that year wasn't part of your qualifying income it's only going to be that bit is only going to be brought into mtd once it is part of qualifying income that exceeds the threshold once you're in mtd you're in for at least three years and your your income would have to drop below threshold to
Andrew Rainford
then be be able to come back out again that's quite interesting in that circumstance then so you've got one new trade that isn't mandated you're going to have to do an annual confirmation and a tax return.
Robyn Milstead
No. So once you're in MTD, your tax return, your final process would be via compliance software. So via MTD.
Andrew Rainford
So it's just the quarterly reporting that wouldn't. Yeah. OK. Fair enough.
Robyn Milstead
Yeah. So you'd have to add the other sole trade at the year end. There are some schools of thought that would say that it makes some sense to register the new trade under MTD so that you're doing everything in the same way. but again that's going to be very client specific and agent specific as to what the most practical thing to do is okay well it's going to be so complicated to um to keep track of isn't it in that sort of situation yeah it is um so in in practice how will the quarterly updates work sure so the first thing to understand about the quarterly updates is that they are i don't like quoting hmrc but they are light touch so they're not Chicks. really to be fully accurate they essentially are there to show that there is a digital record being kept regularly um those quarterly updates are due a month and seven days after the end of each quarter and they can be done they can be done either to on a calendar year basis or a tax year basis so either to the the end of a month of the quarter or to the fifth um the deadline is still the same it would be the seventh after seventh the month and seven days after the quarter end And you can do those quarterly updates using two different systems. You can either use something called bridging software, and that's suitable for clients that want to continue using a spreadsheet. And bridging software is essentially another type of spreadsheet that links your or your client's spreadsheet to HMRC. They tend to be very easy to use, quite cheap to use. The downside being that when you're using a spreadsheet, you may not be getting all of the information that. could benefit you or your client from using bookkeeping software that's a hotly debated topic i'm a spreadsheet girl don't tell anyone um but uh you're also going to have to remember that's bridging bridging software in itself doesn't have year-end functionality so you would also have to look at what's going to what's going to happen at year end that will be particularly um important for any agents that are using the government gateway to file the end of year process because that government gateway is not going to be there anymore for those under MTD. So bridging looks nice and shiny, but you would also have to consider your end of year process. Otherwise, you can submit the quarterly updates using compliant MTD bookkeeping software. So these are the ones that pull in a bank feed and you do the bookkeeping and some numbers spit out nicely at the end as if... by magic of course we know that that is not true there has to be some bookkeeping done essentially the quarterly updates are um again like i said light touch they're not something to get really stressed about um what what is interesting is that um we've yeah we've we've got to be careful as agents in so much as um the pcrt so the professional standards that we need to abide by do say. that you can't just submit any old rubbish. So I was definitely one of the agents, sort of like this time last year, going well I'll just submit nil for everybody because what's the point? And the point is because the PCRT tells us that we have professional standards and we must be trying to submit something that we feel is at least a sort of accurate position of what the client has experienced in that quarter. So, In terms of what you're actually going to report, you're going to report the income and the expenses of just the qualifying income. So just trade and rental for trades under the VAT threshold. You can choose to do three lines. You can also choose to do full accounting. Some of that depends on the software that you're using. Some software doesn't offer three line options. So just make sure you understand what software you're using and what it does before you choose it. And... in terms of rental there is an easement on those quarterly updates that joint rental income can be reported without any expenses so that's really there because HMRC recognised and the professional bodies told them that they needed to recognise that for the reality of some joint owners of property one of them might do the record keeping and the other one might have absolutely no idea until the year end so it's really there because of that kind of circumstance. So that's only for joint properties. So if you have some that are joint and some that are not, your quarterly update will have some expenses on there because you're going to have some expenses from there. They're not joint ones.
Andrew Rainford
I've had a question in the Q&A actually that I think I'll bring in now rather than the end because it's what we're talking about. Actually, the first bit I think we covered before. But this person's asked, so if somebody ceases mid-year, what do they do?
Robyn Milstead
can they avoid further submissions for the rest of the year the quarterly submissions that is yes so they would notify cessation um and then whichever quarterly update covers to that cessation would be the last one excellent okay um so i
Andrew Rainford
guess we should we should ask something that a lot of people are going to be wondering and worried about perhaps but in terms of penalties um are they starting straight away um or have we got like we did with vat um when we had mtd for that. Have we got any kind of concessions for the first year?
Robyn Milstead
We have a soft landing for the first year. And that soft landing means that there won't be any penalty points for late quarterly updates. Only the quarterly updates for the first year. There will be penalty points for late submission of the final tax return, but not for the quarterly update. So that gives us a little bit of breathing room. What's interesting is that a soft landing doesn't stop. the legal requirement to have digital records. So there is still a fine associated with not keeping up with your legal obligation to keep the digital records, but one would assume that that's going to be
Andrew Rainford
um not too eagerly pursued by hmrc in the first year because they have no way of telling whether you're keeping a digital record if they're not bothered about having the quarter just clarify something because i thought i read something the other day and i meant to make a note to ask you about this on exactly this point so soft landing for the first year but that's the first year of mcd it's not necessarily the business's first year is it as
Robyn Milstead
it stands as it stands that's correct so it is just for the April 26 cohort. at the moment I I have my suspicions that we may see a soft landing for everybody's first year just in terms of agent workload um the soft landing I've I've written a fair amount on this because when the soft landing was first announced I was really upset about it um I think morally it's the right thing because I don't think anybody has is really ready particularly unrepresented taxpayers I think it would have been morally wrong to have see them racking up penalty points on a system that they don't know anything about. But from an agent point of view, we've spent lots of time telling our clients, you've got to do this, you've got to do this, and we're going to charge you for this. And then all of a sudden, the system that clients think, why am I doing this anyway, also has no stick attached to it. From an agent point of view, it's quite a tricky position to have to then go to the client and say, you sort of have to do it, but you kind of don't. And I kind of also want to charge you if I do do it for you. It's not very nice. landscape plus the thought of that next year when we also have the 30 000 cohort which for many agents is going to be significantly more than we have in the 50 000 um we're essentially having two sets of clients go live at the same time i don't like that and i would be surprised if the again the professional bodies aren't lobbying to help us with that um as the thresholds decrease the percentage of taxpayers that use agents get higher as well so the agent community voice should get stronger and um yeah i i really i i obviously i have no bombshell i can't tell you yes there's gonna be some soft landing next year but i would be surprised if it's not considered but
Andrew Rainford
don't bank on it um now just clarify another question um so the quarterly updates i know you explained that they're quite um like a light touch they're not tax returns are they
Robyn Milstead
they're not tax returns and that's something that you'll see if you're on social media. Everybody likes saying oh there's five tax returns to do, there's lots of mini tax returns, they're not and I'm all for saying I hate MTD etc and bashing it but we want to be accurate about the whole system and it's really important to make that distinction between tax return which has different legal consequences for example there are penalties associated with inaccuracy on a tax return. That's still the case under MTD. For the quarterly updates, there's no penalty associated with inaccuracy. So that is such an important distinction. And if you see people saying that it's five tax returns a year or more, some people talk about more, it might be worthwhile me telling you about why some people might say it's more than five. And now it's not five tax returns, but you can end up reporting more than five things so the quarterly updates are the sum of their parts is the best way to describe them you'll anybody that has a sold trade and for example a UK property or more than one UK property essentially they're making two quarterly updates a quarter so you you might see people saying more than five because it's not really just four quarters it's eight quarters plus your end one in that kind of circumstance and that can be multiplied so if you have more than one trade you're making more than one submission so if you have someone that has two trades a UK rental property and um and foreign print foreign property is also potentially more than one submission because it will go by jurisdiction so if you have someone that has 10 properties across the world then that's 10 different parts to make up the one ported update. It can get really busy really quickly. Where those figures get quite fun to look at is if you have a look at your client base and you say, OK, well, I've got 300 clients at the moment, that 300 submissions. If you then break it down with how many are mandated and go, OK, well, this person has a property and a trade. Now I've got to add eight to that a year. Those figures look really funky. So that's why you might see some people. talking about lots and lots of submissions. They are and they aren't. You're always going to have one quarterly update and a quarter, but to make that quarterly update complete there might be more than one income source to consider. Okay. And sorry, one extra point on that. It's kind of important to think of it that way because you can be using different software to submit the different income sources. That's essentially why there's that distinction.
Rachael Brown
Okay.
Andrew Rainford
So when MTD was first announced, it did seem like they were trying to bring the payment of tax closer to when it was earned, similar to when we had basis period reform. So does the quarterly reporting change the tax payment deadline on these specific sources of income?
Robyn Milstead
No, there's no change to tax payments at the moment. So tax payments exactly the same as we used to. Payments on account stay the same. they're calculated in the same way, same payment deadlines. There is a lot of suspicion that that will change. It's difficult to see why this wouldn't be associated with tax payments. I think a lot of agents would have found it more palatable if actually they had said it was related to tax change or tax payment change, even if they said not immediately 10 years down the line. But the official line is no, no change.
Rachael Brown
Excellent. One thing that's sort of just popped into my head there is the not tax returns. Now, when you submit a tax return, obviously, if you haven't got all the information to hand, you can submit with provisional figures and correct later on. So what's the situation with quarterly updates if your client hasn't sent the information? I mean, could you, for example, submit a nil return and then return to it later on?
Robyn Milstead
you know correct the position in theory yes in practice as I was saying before with the nil returns it's a matter of the the professional conduct rules that a client may well get away with submitting something completely ridiculous and and estimated but those of us who are bound by the PCRT, we... should not be doing that or at least we should be trying not to do that is really what the PCRT says is that it's not a case of just going oh well doesn't matter we need to get to a place where we've done as much as we can to make it as accurate as we can and I dislike that because it's very ambiguous isn't it but at the same time I think the point of the PCRT being that way is because they acknowledge that... we may well have those situations where we just can't get hold of the client and i think i would be really considering not doing a nil return for a client as i said i used to think what what the hell i'll just do it i i think i've changed my position on that and i wouldn't be comfortable doing that there is you know you've also got to consider if you've got a client that you just that just can't be contacted one they possibly have grounds for a an appeal against a penalty point if they're ill if that's why they haven't been responding to you and two there is also a practical point of you know if your clients don't respond that's why there are penalty points there because there has to be a stick there for them not complying and if we're doing everything that we can then perhaps sometimes we have to allow our clients to be non-compliant because they're not playing ball with us um It is a tricky one and I think this is one of those things where when we get rolling with MTD, we will start to understand more about at what point do we feel comfortable submitting something submitted. Ultimately, again, there's no penalty for inaccuracy and these quarterly updates are cumulative. So what actually happens is that if you submit something fairly estimated for Q1 and then eventually the client actually gives you the information that you were waiting for, If by the time Q2 comes along, all you're going to do is update that via the Q2. So the Q2 is going to give you the cumulative position and you're happy because then by then everything is correct. Definitely, that's something that we're going to see more as we get rolling on, though.
Andrew Rainford
It does. It does seem like there's still going to be a bit of a mad rush at the year end, doesn't there? Because if there's no there's no tax payment partway through. then they can just say I'll chase up that expense at the end of the year when I need to.
Robyn Milstead
Yeah so really we want to see the Q4 be correct or as correct as possible before tax adjustments. So the quarterly updates don't have any of your, they don't have to have any of your tax adjustments. You can submit them with tax adjustments if you want. I think that would, most people would find that probably overkill to do that every quarter. But that's your prerogative if you want to do that. So... Yeah, we would want the Q4 to be in a position, hopefully, where we're just doing tax adjustments at the year end. But exactly this, we don't really know, do we, until we get started, how our clients are all going to react. And it's fine. Lots of people are testing, but once we are live with such volume, that's when we're really going to see that diversity of what clients send and what practical things we actually have to do to make this work.
Rachael Brown
Excellent. Somebody just asked on what we were just talking about there with the quarters. Hypothetically, could you just record the income for the first three quarters and then put all the expenses in in Q4?
Robyn Milstead
Hypothetically, you could. But again, it goes back to the PCRT that the quarterly updates are designed to have the expenses in there. So as advisors, we should be putting those expenses in.
Rachael Brown
Yeah, I guess it's a question of best practice as well, isn't it?
Robyn Milstead
It's exactly this.
Rachael Brown
Yeah. So you mentioned bridging software before. Is buying special software mandatory, be that accounting software or bridging software, or if so? how would you advise clients and their advisors to go about choosing a suitable package?
Robyn Milstead
Software choice has to be one of the most difficult parts of MTD, in my opinion. You have to have compliant software and you can find out which software is compliant by going on to HMRC's MTD tool. So just be careful. I've seen, I'm sure it won't happen to us as advisors, but I've definitely seen some of my friends who are not tax people going and Googling HMRC compliance software and they get the general self-assessment list, which is enormous. So just be careful that you're looking at the MTD one. And you can also have a look at which softwares are in development too. In terms of choosing software, it's going to be really individual per practice. and potentially per client. So myself, I've approached this a little bit on a practice basis. So I work for a company called LKA Chartered Accountants. We're a zero practice. So in the first instance, I know that we can give the most support to our clients, potentially on zero. But I haven't forced all of my clients to use that route. A lot of my clients are going to stay on a spreadsheet because for me, I know that they're doing a good job of that spreadsheet. I know that they're getting all the information that they need from that spreadsheet and that using bookkeeping software is not going to add an awful lot to their life. They're not people that are growing their businesses. They're not people that particularly want to learn a new system. And I think that that's completely legitimate. So I've given them the option of bridging software. And I'm going to obviously be there at the year end. So I'm going to use my software that's compliant. to file their year end. How can practices choose? It's unfortunately a case of investing the time to look at what's out there. It's very likely that you'll already have some idea of what you're going to use by now unless you are an advisor that has literally just been using the government gateway and nothing else and spreadsheets then that's going to be an uphill battle for you because because you really do need to choose what you're going to use. But, um, Have a look at what's out there. I've been surprised. So as part of Accountants Therapy, we've been running demos across the last couple of weeks and on into March as well with compliant softwares to find out what they do, what they're going to offer roadmap wise. And I've been really surprised at some of the things that are out there. Some companies that you've just never heard of are now coming up and building these softwares because there's a market out there and some of them look great. And that's. again as I said I'm a spreadsheet girl so for me to say that bookkeeping software looks great is quite something. Yeah unfortunately I don't have a quick fix for how you can choose your software it's very very individual to each agent and it's very individual to your client base but what I would suggest is don't just let your clients go out there and choose that's a mistake that I made last year and told in my enthusiasm to tell all my clients about MTD I went go and have a research yourself and aside from everybody choosing a particular software that I don't really like and me now having to learn it, I've now got a variety of softwares that I'm now going to have to learn. So maybe the best bit of advice there that I can give from what we've seen in therapy is to narrow down your choices where you can, find things that you think you could work with and then give your clients. you can give them just one option that's the low stress way or give them two or three options some really good advice thank you no worries so in terms of what we do now should advisors be registering their
Andrew Rainford
clients or will hmrc just put them into MTD based on their plus tax return?
Robyn Milstead
I love this question. So there is an emphasis on agents registering their clients and if you ever ask HMRC what they will do if nobody registers a client they're really shady about it. The answer is that they will eventually sign up your client for you they will We don't have a time scale on that. Previously they've said something like around August, September time, so potentially after the first quarterly update. Before there was a soft landing, that was obviously of concern and that would be motivating for us to register our clients because we don't want them to get a penalty point when they're eventually registered and you go, whoops, I should do the first quarterly update. Now with a soft landing, you could well go, oh, who cares? I'll just let HMRC do that work for me. That's not actually advisable. As I said at the start, one of the reasons for MTD is to move the clients from the old system to the new system. And part of that is a data migration. And what's happening when you register your client is you have the opportunity to review that information that's being migrated and to update it if necessary. So although there is the safety net, if you like, of HMRC eventually signing people up if necessary. it's not advisable as agents it's definitely the better way round to sign your clients up the registering process itself hmrc say takes about four minutes to be honest i've done a fair few of my clients this week and i don't think it's a four minute process i think it's a shorter process than that happily so and it's worth it just having a quick look at what gets pulled through and what HMRC are expecting. I've only had... one client where I've had to add an income source because it wasn't already there. For me everything else has been correct and the information has been good but the thought that you would start this client off on a system that has bad information it's definitely more worth your time doing it. Some people charge for that so I've been charging my clients a bit of an admin fee £25 for me to register them unless we're doing the quarterly updates and then I've said I'll waive that charge. um across therapy we've had a real mix of people going well i want to own that process so i'm not going to charge because it's really me that wants to do it and there's also been people saying i'm going to i'm definitely going to charge more because you know i'm doing work for the client so therefore i will charge so um yeah you should register your clients is my professional opinion on that yeah um i think one more from from us and then we'll move on to the q a um
Rachael Brown
Where should advisors and their clients separately go if they need more support? Presumably there are different guidance depending on whether you're the business or whether you're the advisor.
Robyn Milstead
Sure. So taxpayers direct should go to their agents, shouldn't they? I couldn't say anything other than that. Otherwise, HMRC have a toolkit out there which is fairly comprehensive. and at least going straight to HMRC, you're not going to get the inaccurate information that... that you could get off of TikTok or Instagram. So always the little warning there for anybody, just be very careful what you see online. I see an absolute crazy amount of misinformation out there and it's now become my mission to get rid of all of that. So don't be like me because you kill yourself in the process trying to get rid of all that misinformation. Go straight to a reputable source. So for advisors, a reputable source is you can go to HMRC no not not many of us love doing that but your professional body is definitely going to be a good source there the ATT particularly have some amazing resources that are written in a way that most people can digest and find exactly what they want otherwise just a little plug for accountants therapy for us it's been it's been literally a year of talking about MTD and covering all the questions and therefore we're a really knowledgeable bunch of people. It's only by having those conversations that I can come and do something like this and feel confident knowing that well let's see that I can answer the questions we'll see if I can answer all the questions. But yeah we would be very happy to welcome anybody here that fancies finding a community of people that they can bounce questions off not just across MTD but across practice in general. And if you don't mind, I'll just say if you go to accountancetherapy.co.uk forward slash join slash now slash, you can have a month free of membership. So, yeah, there are resources out there. Just make sure you're using something reputable.
Rachael Brown
Absolutely. And speaking of reputable, we will be, I believe, sending out some additional resources when we send the recording of this webinar out for the attendees as well. Okay. Well, I think that's it for the formal session. So I'm going to open the floor for a Q&A. I'm going to bring Rachel back on screen so we're all here. We have got a couple. We've covered some of them as we've gone along. So there's one quite specific one here. So I'll start with this one because I suspect it'll probably be quicker to answer than the other. So if someone's got a client that's over the threshold for 24, 25, so they're over 50,000, ceases trading in the current year, 25, 26. But they've also got property income of, say, 12,000 pounds a year. Would they be stuck in for the three years that you mentioned earlier on the basis of the rental income?
Robyn Milstead
Yeah, so again, it's looking at what has made up the qualifying income that's breached the threshold. Is any of that continuing? If any of that is continuing, that bit is part of MTD. So even if it's lower than the threshold, even if it's very, very low, it's still going to be, that bit is going to be mandated.
Rachael Brown
Would that be the case if it was under the property allowance? Yes.
Robyn Milstead
So it depends what you've reported on your return previously. So if you've got other income, so if somebody, that's a really good question. The straight answer is yes. The straight answer is yes to that because usually you would claim your trading allowance or your property allowance in your end of year return. So the fact that it's made up, when you're doing a tax return, if you've got other income that makes sense. that you're reporting on your tax return you still have to to report the up to thousand pounds of a trade or not you can't just leave it off of your return so yes sorry that's i'm answering that badly let's go back to the start yes it would yeah wrong for the jury but what you can do so what you can do with that is you could choose if you know it's going to be under the trading allowance of the property income allowance you could choose to put 250 pound of expense each time
Rachael Brown
Yes. yeah so it was a like effectively netting off and then you've not got to do so much heavy later on and what about i suppose just while we're on that subject because i'm my brain's going as you're as you're answering i think what about rent a room income because that's not really a property business is it it's uh yeah it works again the same as the
Robyn Milstead
property income etc so um yes that would still if that's on your return and it's made up quarter of qualifying in it's made call of a part of your qualifying income then yes that's going to be also part of it and again you could choose to offset some of the rental rooms during the year or at the or at the year end i think most people prefer to do it a year end because or maybe in theory you're supposed to keep a digital record of your actual expenses there as well so that you would be able to choose between the two yeah i guess it's almost like a notional expense isn't it as you're going along because i guess if if
Rachael Brown
if it's supposed to be giving you an idea of your end of year tax position as you're going along you'd want to be knocking it off as you were going along to get as accurate a picture of as possible yeah yeah um here's a good one here for you this is uh this is probably a head scratcher but you're you're the ideal person to answer i think find out um for firms that have got a large base of smaller um or less digitally engaged clients i think you hinted at this earlier What's the most effective transition strategy you've seen that works in practice?
Robyn Milstead
Getting your strategy right or set first. So thinking about how you can apply the same strategy across as many of those clients as possible would be the best thing that I can suggest. So again, back to software choice. having less choices will streamline the process better. There's also a really good point that was mentioned in one of the demos we ran last week about using the same end of year software. So some of the quarterly updates software will also do year end, but a lot of agents, of course, already have their systems for doing year end. So your tax calcs, your irises, your CCHs, etc. The danger of moving off of the tax cuts, the CCHs, your year-end process, and putting your doing the year-end process for clients in the various different bookkeeping software is that you lose the ability to have a centralized list of what what's happening with your client so you can't pull from one source and see what the qualifying income is for people so um for me i think it makes a lot of sense to centralize your year-end process somewhere um whatever software works for you um and to cut down as much as you can on what software choices you recommend to your clients and
Rachael Brown
i suppose one one from me because i imagine there are people out there that have got them but where you've got clients that just aren't having it you know you've been you've been speaking to them about it since it was first announced and you know their attitude is is that oh well it's not going to affect me um a couple of tips for for getting you know actually the
Robyn Milstead
horse to drink after you've brought this um we've had that same situation come up on on our group yesterday with someone that they think they could even get an exemption but they just will not engage um Yeah, which is really stressful. I think the first thing is to consider whether that person has got any grounds for an exemption. That seems to be a fairly good strategy that's being employed by a lot of people in therapy. At least Brian encouraged them to engage with looking at the exemptions and again, ask those questions like, have you ever been diagnosed with a learning disability? that that kind of question is a little bit awkward but might just get you that exemption and then the client is happy for those that just will not engage what would we do if they were just normal tax return clients eventually we would have to disengage unfortunately i think that is that's the thing it's more more than it is otherwise on that one um we are running a six-month course called mtd together that's free for our members um and our next one which is mid-March, is exactly on that topic. how do we get clients to engage and what do we do if they're not engaging? So just another shameless plug.
Rachael Brown
No, not at all. We haven't actually got, I think we've covered all the questions that are in the Q&A, so I'll just give it another minute in case anyone can think that they want to ask Robin while we've got her on. But, yeah, thanks, Mel, just pointing out as well that we're going to be at FAB 2006, 26 even. I don't know if we were there 20 years ago. So we'll see you there as well.
Robyn Milstead
Are you-
Rachael Brown
are you exhibiting there you haven't found i'm not i believe the the firm is are you going rachel i am yeah it's uh it's local for me yeah because you're down in the midlands aren't you there you go you'll be able to uh to go and say hello so no no no still no more questions so i think you you did very well there considering some of them were a bit i'm sure somebody can find something really difficult for me i have to be very quick because we've only got five minutes left but um Yeah, in fact, no, there's nothing been in for quite a while. So I think we'll call that done. But before we wrap up, I'd just like to say a couple of thank yous there. Firstly, to Rachel, it's been a pleasure co-hosting with you. And of course, to Robin for sharing your valuable insight and experience with us. You know, your perspective has added real depth to the discussion. And of course, thank you to all of you for joining us and for the engagement throughout your questions. We know how busy professional life is, so we really do appreciate you taking the time to be part of the session. We'll be planning our next webinar for May or June topic to be confirmed, but we'll be sharing details and how to register, etc. Very soon. And we'd love to for you to all join us again. OK, thanks, everyone, and look forward to seeing you next time.
Andrew Rainford
Bye.

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