MTD for Income Tax: what four updates a client does to a practice

The dates, from the source #

HMRC sets out who is in scope by qualifying income and tax year. A sole trader or landlord registered for Self Assessment must use Making Tax Digital for Income Tax where qualifying income passed these thresholds.

HMRC also states that partnerships will be brought in at a later date without giving one. The eligibility guidance is the thing to check a client against, because qualifying income is a defined measure and not simply profit.

The reporting rhythm is four quarterly updates a year, with standard quarters ending 5 July, 5 October, 5 January and 5 April and deadlines on 7 August, 7 November, 7 February and 7 May.

Why frequency matters more than difficulty #

A quarterly update is not conceptually hard. The problem is arithmetic. Under the annual cycle, a practice ran one records chase per client per year. Under quarterly updates it runs four, at dates fixed by HMRC rather than negotiated with the client.

It also lands on top of the existing calendar rather than beside it. The 7 February update deadline falls a week after the 31 January Self Assessment deadline, which is already the hardest week in the practice year. Anybody planning around this should look at what January already does to a practice before assuming there is slack in early February.

Do the arithmetic on your own list #

The only number that matters here is yours. Three inputs:

1. How many of your clients fall in scope at each threshold date

2. How many separate contacts it currently takes to get a full set of records from one of them

3. How long one contact takes, including establishing the file state before writing it

Multiply the first two, then multiply by four for the quarterly cycle, then by the third.

The number that comes out is not a saving and it is not a forecast. It is the size of the recurring obligation the practice has just taken on, and it is worth knowing before the first deadline rather than after it. The cost of admin time calculator runs the same style of calculation for admin generally.

Which parts of the quarterly cycle run on rules #

The pattern is the same one that shows up everywhere in practice admin: the tracking is mechanical and the thinking is not. The risk with a quarterly cycle is that four times as much tracking quietly displaces the thinking.

The honest caveats #

Two of them. First, nothing on this page is tax advice, and eligibility, exemptions and the treatment of individual clients are for the practice to determine from HMRC guidance and its own professional judgement. Dates and thresholds also change, which is why the source and the date it was read are at the foot of this page.

Second, no software makes a practice compliant. Your obligations over accuracy, client data and professional conduct sit with you whatever is in the stack, and you must satisfy yourself that any arrangement meets them.

What can reasonably be said is that a quarterly obligation with fixed dates and a known client list is about as rule-shaped as practice work gets, and that practices which already track receipt of records systematically will find this a smaller change than practices which do not.

If you are not sure which one you are, the free audit is a way to find out. So is reading what the records chase already costs you.