MTD – more admin than expected?
- Thread starter Cre8 Business
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I think that’s a fair reflection of how a lot of people are feeling about it.
And you’re right, for some businesses, especially simpler ones, the quarterly updates won’t necessarily add a huge amount of value in themselves.
But I suspect the intention is less about the individual update, and more about changing behaviour over time, moving from “once a year” to something more regular and visible.
Where it seems to become difficult is exactly as you say, for those who wouldn’t naturally use software or an accountant, it’s a big shift for something that doesn’t obviously feel beneficial to them.
That’s probably where most of the friction is going to sit.
Especially for smaller, straightforward cases where the current system already works reasonably well for them.
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That is why I said in 2 years when Turnover above £20k is brought into the fold, presently a small business can just use the HMRC site and submit an end of year tax return, they will now have to use a Commercial software to submit the QU.
HMRC can not even get the correct CIS figures at the end of the year so not sure how they will get them fed through to the QU, I have had at least 10 CIS clients for 24/25 where HMRC have said they have not had any CIS deducted which I have then had to appeal, more time wasted for myself and HMRC.
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I'm amazed how many self-employed people I bump into who seem totally sure they don't need to change how they work. I've been hapily using freeagent for years but my accountant wants me to switch top xero. It seems to do the same things, but will be a bit cheaper accountancy wise if I swap. He recommended Freeagent originally, now has swapped. I had intended a clean swap at the start of the month but as I am also going to make changes to my VAT system too - we have put it off a bit. The 4 times a year reporting makes no difference to me as I don't use any of the info it actually generates in terms of running things. Keeps the accountant happy. However - those people who currently do things with paper and receipt keeping seem unaware.
The only thing that worries me is that freeagent have ALL my receipts, I have none - so when I stop paying them, and pay xero - what happens if I need any actual documents sitting on the freeagent servers?
The only thing that worries me is that freeagent have ALL my receipts, I have none - so when I stop paying them, and pay xero - what happens if I need any actual documents sitting on the freeagent servers?
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That’s a really helpful real-world perspective, Paul.
I think you’ve hit on two of the biggest issues.
Firstly, there are still many self-employed people who don’t yet realise that, at some point, the way they keep and submit records is going to need to change.
Secondly, for those already using software well, it can understandably feel like more of a compliance exercise than something that directly helps them run the business day to day.
On the receipts point, that’s a very sensible concern. Before switching, I’d strongly recommend downloading and securely storing copies of all key documents and historic records so you are not reliant on one provider’s servers.
A lot of people are focused on the reporting deadlines, but the practical housekeeping around records is just as important.
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Just as an aside - you don't run payroll do you? If you do, please don't use xero payroll.
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I have heard other payrollers say that it was designed by accountants, not payrollers! I haven't used it.
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I use Xero Payroll for very basic Payroll, for example a monthly Director's Salary of £1,047.50 as per Personal Allowance, which always seems to work fine when submitting RTIs. I also use Xero Payroll with a link to NEST for Pension Filing, but I have found that the NEST integration is not very user friendly and occasionally needs manual intervention, including logging into NEST to sort it out. But I suspect that has more to do with NEST than Xero.
My Accountants originally recommended Xero to me back when MTD for VAT came in and they always said don't use Xero Payroll and they used BrightPay which I agree is probably more of a Payroll Person's Software.
I'd be interested to hear what issues have cropped up with Xero Payroll because so far I can't say I've seen much wrong with it.
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I haven't used it, I am just reporting what I have heard, however you are using it for very basic payroll which would be unlikely to throw up any issues. Nest works fairly well if the payroll system sends it the right information. Manual intervention would suggest Xero is not offering all that Nest needs.
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I’m reading all the points and comments again after several days, and I think part of the issue is that all of this often gets framed purely as a compliance exercise or as something done to keep the accountant happy.
From my side, I tend to look at it through a broader operational lens. Timely financial records should support visibility over business performance, revenue position, cost treatment, trends and decision-making through the year. That is where reports such as the balance sheet and profit and loss account start to become extremely useful management tools every month rather than just year-end outputs.
I’m not suggesting every small business owner should become a finance manager, but anyone running a business or trading through a limited company and carrying the title of Director should already operate in an executive capacity. Financial discipline, visibility and control come with the role.
I probably come at this with a slightly different perspective because I have a corporate/enterprise background and I’ve seen how resilient businesses can be when regulatory changes occur. I appreciate I have an unfair advantage because of my technical orientation in my business role, but this allows me to step back, look at business processes as a whole, and think about how they can become more efficient, consistent and better governed. That includes sensible automation where it helps, but with proper control around it.
I can also understand why some view MTD as extra admin, but for a business that is serious about growth, the underlying financial discipline should already be part of the operating model. If a Director has no interest in carrying that load personally, that’s fine too, but the answer is then to factor the right support into the business properly rather than acting surprised that the responsibility exists in the first place.
More broadly, I also think we are fortunate to operate in an economy that gives us formal business frameworks in the first place. Better reporting discipline does not just help the individual business. In aggregate, it can also give a clearer picture of where the wider economy stands, which is no bad thing in a highly competitive global market, but I digress...
From my side, I tend to look at it through a broader operational lens. Timely financial records should support visibility over business performance, revenue position, cost treatment, trends and decision-making through the year. That is where reports such as the balance sheet and profit and loss account start to become extremely useful management tools every month rather than just year-end outputs.
I’m not suggesting every small business owner should become a finance manager, but anyone running a business or trading through a limited company and carrying the title of Director should already operate in an executive capacity. Financial discipline, visibility and control come with the role.
I probably come at this with a slightly different perspective because I have a corporate/enterprise background and I’ve seen how resilient businesses can be when regulatory changes occur. I appreciate I have an unfair advantage because of my technical orientation in my business role, but this allows me to step back, look at business processes as a whole, and think about how they can become more efficient, consistent and better governed. That includes sensible automation where it helps, but with proper control around it.
I can also understand why some view MTD as extra admin, but for a business that is serious about growth, the underlying financial discipline should already be part of the operating model. If a Director has no interest in carrying that load personally, that’s fine too, but the answer is then to factor the right support into the business properly rather than acting surprised that the responsibility exists in the first place.
More broadly, I also think we are fortunate to operate in an economy that gives us formal business frameworks in the first place. Better reporting discipline does not just help the individual business. In aggregate, it can also give a clearer picture of where the wider economy stands, which is no bad thing in a highly competitive global market, but I digress...
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My understanding is that MTD for ITSA quarterly data is intended to inform the OBR about YTD figures for what will become tax due so the OBR isn't always looking back at previous year's figures.
As far as I am aware, there is no current 'RTI' intention for MTD ITSA data to be used for macroeconomic forecasting.
I think that will have to wait until HMRC has decided how they will treat Corporation Tax in the digital transformation and in what form quarterly reporting of CT will be introduced. Not sure if that's on the horizon yet.
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I have to say this MTD, does not make any sense to me. First, they blocked me to do it on my own online. Then they forced me to use an authorised software which costs me money. Then, they still allowed me to use my spreadsheet and upload my data into this software. I'm not allowed to manually copy the totals from my spreadsheet into the Software, but I have to use a Digital Link. though I can still manually type the numbers on my spreadsheet... I think, is this an orchestrated plan to make us to pay taxes quarterly rather then wait until the 31st of January?
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I don't know, but it could generate confusion, if you start paying taxes before the end of the tax year. Let's say, you make money the first two quarters and you pay taxes on those, then, let's say, you are not able to generate any income and you do need the money to pay the bills, which you do not have because you gave them to HMRC, what do you do now? Begging HMRC to get the money back as soon as possible?
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One of the positives I see from this system is that people will start to manage their business finances better and plan for this issue.
I wonder if this affects more or less people than the issue of getting to the year end and not saving to pay any taxes?
I wonder if this affects more or less people than the issue of getting to the year end and not saving to pay any taxes?
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Surely, anyone doing self assessment (i.e. sole traders now subject to MTD) is already in the hook for advance "payments on account"?
Or does MTD work differently?
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No, at the moment, it seems, you do not have to pay quarterly, but annually as usual. You only need to submit these quarterly updates and a final submission using an HMRC Recognised software. A lot of people does not know but they need to register for MTD, it is not an automatic process and if they do not do their first quarterly submission by the 7th of August they will get a penalty.
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A few of my clients have still not received letters from HMRC saying they need to file under MTD, the first they knew was from the emails I sent them.
There are no penalties for late submission during the 2026/27 tax year, but this will all change next year where things will get a lot worse as everyone with Turnover of £30k will also need to file under MTD.
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This thread predates the first real deadline (7 August), so worth an update from the other side of it, because a few of the worries upthread turned out differently in practice.
The spreadsheet position: you can keep your spreadsheet. The records themselves can live in one; what changed is the sending. Quarterly totals go to HMRC through MTD-compatible or bridging software rather than typed into the HMRC website. Bridging tools exist precisely for spreadsheet users.
What the quarterly update actually is: a digital summary of income and expense totals for the year so far. It is not a tax return, nothing is calculated, and no payment is due with it. The real work is having records complete and categorised, which was true before MTD too.
Mistakes and missed deadlines: updates are cumulative, each one a running year-to-date total. Fix your records and the next update carries the corrected totals; you do not resubmit the earlier one. And HMRC confirmed a soft landing for 2026/27: no penalty points for late quarterly updates this year, though all four must be in before the final declaration.
None of that makes the extra admin vanish, but the version feared upthread (locked out, forced into software bookkeeping, fined for a wrong first quarter) is not what shipped. Figures per GOV.UK, checked today.
The spreadsheet position: you can keep your spreadsheet. The records themselves can live in one; what changed is the sending. Quarterly totals go to HMRC through MTD-compatible or bridging software rather than typed into the HMRC website. Bridging tools exist precisely for spreadsheet users.
What the quarterly update actually is: a digital summary of income and expense totals for the year so far. It is not a tax return, nothing is calculated, and no payment is due with it. The real work is having records complete and categorised, which was true before MTD too.
Mistakes and missed deadlines: updates are cumulative, each one a running year-to-date total. Fix your records and the next update carries the corrected totals; you do not resubmit the earlier one. And HMRC confirmed a soft landing for 2026/27: no penalty points for late quarterly updates this year, though all four must be in before the final declaration.
None of that makes the extra admin vanish, but the version feared upthread (locked out, forced into software bookkeeping, fined for a wrong first quarter) is not what shipped. Figures per GOV.UK, checked today.
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There's will always be those who like to spread FUD.
What you describe is exactly what I understood it to be.
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I heard on LBC last week that only 25% have registered or made their first quarterly return
I think I panic to much
I think I panic to much
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My first return cost me £100 for accountants fees and he says probably a bit less next time now registration done. He also reports the end of year one is still the only one that will matter. Nothing useful in it for hmrc at all?
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Interesting to see the conversation moving on now that we've actually passed the first quarterly deadline.
From what we're seeing in practice, I think there are two slightly different issues getting mixed together.
The quarterly update itself is relatively straightforward. It is essentially a summary of income and expenses rather than another full tax return, and HMRC aren't applying penalty points for late quarterly updates during this first 2026/27 year.
Where the real issue seems to be for many people is everything around it: knowing whether they should be in MTD, getting registered, keeping the records in the right format and actually getting the information submitted through compatible software.
We've been helping people through that process and there is definitely a wide range of preparedness out there. Some have accountants dealing with everything, some are doing it themselves, and quite a few appear still not to have done anything at all.
So I wouldn't panic if somebody has missed 7 August, but equally I wouldn't ignore it. The sensible thing is to get set up properly now rather than arrive at the next deadline on 7 November with two quarters to sort out.
From what we're seeing in practice, I think there are two slightly different issues getting mixed together.
The quarterly update itself is relatively straightforward. It is essentially a summary of income and expenses rather than another full tax return, and HMRC aren't applying penalty points for late quarterly updates during this first 2026/27 year.
Where the real issue seems to be for many people is everything around it: knowing whether they should be in MTD, getting registered, keeping the records in the right format and actually getting the information submitted through compatible software.
We've been helping people through that process and there is definitely a wide range of preparedness out there. Some have accountants dealing with everything, some are doing it themselves, and quite a few appear still not to have done anything at all.
So I wouldn't panic if somebody has missed 7 August, but equally I wouldn't ignore it. The sensible thing is to get set up properly now rather than arrive at the next deadline on 7 November with two quarters to sort out.
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one thing worth pinning down from this thread since it keeps coming up - the actual threshold dates, think its causing some of the confusion on whether this even affects people yet
£50k+ (24/25 income) - mandatory since 6 april 2026, first quarterly update was due 7 august£30k+ - mandatory from 6 april 2027£20k+ - mandatory from 6 april 2028
so that £25k CIS subcontractor a few posts up isnt caught yet but will be in 2028, and thats exactly the group thats going to struggle most since theyve never needed software or an accountant before now
also worth knowing - its gross income not profit that counts toward the threshold, catches more people earlier than youd think
£50k+ (24/25 income) - mandatory since 6 april 2026, first quarterly update was due 7 august£30k+ - mandatory from 6 april 2027£20k+ - mandatory from 6 april 2028
so that £25k CIS subcontractor a few posts up isnt caught yet but will be in 2028, and thats exactly the group thats going to struggle most since theyve never needed software or an accountant before now
also worth knowing - its gross income not profit that counts toward the threshold, catches more people earlier than youd think
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Yes, this is an important distinction and probably explains quite a bit of the confusion.
The £50,000 threshold is only the first stage. The £30,000 group comes in from April 2027 and then those over £20,000 from April 2028, so the number of people affected is going to increase substantially over the next couple of years.
And as you say, it is qualifying gross income from self-employment and property, not profit, which is something I suspect quite a few people haven't fully appreciated yet.
The £20k–£30k group could actually be one of the most interesting. Many will have fairly straightforward businesses and may never previously have felt they needed an accountant or any particular bookkeeping system.
From what we're seeing already, the challenge isn't necessarily the quarterly submission itself. It's helping people understand what they need to do, getting them set up correctly and then keeping it simple enough that MTD doesn't become another administrative headache.
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Two things in here worth picking up.
On CIS, nobody's answered the question further up. The deductions are still reported the way they always have been. What changes is that the income and costs need recording as you go rather than being assembled at the year end. Your turnover is the gross figure and the CIS deduction is tax already paid, so if you're only recording what actually lands in the bank you'll understate your turnover. That matters more than it used to now the thresholds are tested on gross income, because it can put you on the wrong side of a line you thought you were clear of.
On the "only the year end matters" point. I'd be careful with that. There's some truth in it in the sense that the final declaration is where your tax is actually settled, and the quarterly updates are summaries rather than a calculation. But the obligation to file them is real and the record-keeping requirement sits underneath all of it. The easement on penalty points for the first year is a transitional thing, not a permanent state, and late payment penalties were never eased at all.
The honest version is that year one is more forgiving than year two will be, and treating it as optional is a habit that gets expensive in April.
On CIS, nobody's answered the question further up. The deductions are still reported the way they always have been. What changes is that the income and costs need recording as you go rather than being assembled at the year end. Your turnover is the gross figure and the CIS deduction is tax already paid, so if you're only recording what actually lands in the bank you'll understate your turnover. That matters more than it used to now the thresholds are tested on gross income, because it can put you on the wrong side of a line you thought you were clear of.
On the "only the year end matters" point. I'd be careful with that. There's some truth in it in the sense that the final declaration is where your tax is actually settled, and the quarterly updates are summaries rather than a calculation. But the obligation to file them is real and the record-keeping requirement sits underneath all of it. The easement on penalty points for the first year is a transitional thing, not a permanent state, and late payment penalties were never eased at all.
The honest version is that year one is more forgiving than year two will be, and treating it as optional is a habit that gets expensive in April.
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On CIS, not sure what you are on about to be honest, CIS income has always been reported as gross whether it be quarterly for VAT or annually for the end of year, the point I was making upthread is why should a Subbie maybe earning as little as £25k a year have to be part of this MTD rubbish when as far as they are concerned they are already having tax deducted.
The ‘only end of year matters’ point is perfectly valid as everything that went before it with the quarterly updates are basically meaningless, as far as I am aware the only penalties starting for the 2027/2028 tax year are for late filing of the quarterly updates, so you can file whatever figures you like as long as the end of year return which determines your tax liability is correct and submitted on time.
So this whole MTD fiasco is a total waste of time which is costing the tax payer more money and time, for absolutely nothing in return.
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I think that is really the key distinction.
Whether MTD is a good policy or a waste of time is one debate. The practical issue for sole traders is that, like it or not, the rules are now here and the number of people caught by them is only going to increase.
I can completely understand why someone having CIS deducted at source might look at quarterly updates and ask what additional benefit they are getting from the process.
But for anyone who is affected, the important thing now is not to get bogged down in whether the system should exist. It is to understand what they actually have to do, keep it as simple as possible and avoid turning an administrative requirement into a bigger problem than it needs to be.
That is probably where the real challenge with MTD lies for a lot of small businesses.
Whether MTD is a good policy or a waste of time is one debate. The practical issue for sole traders is that, like it or not, the rules are now here and the number of people caught by them is only going to increase.
I can completely understand why someone having CIS deducted at source might look at quarterly updates and ask what additional benefit they are getting from the process.
But for anyone who is affected, the important thing now is not to get bogged down in whether the system should exist. It is to understand what they actually have to do, keep it as simple as possible and avoid turning an administrative requirement into a bigger problem than it needs to be.
That is probably where the real challenge with MTD lies for a lot of small businesses.
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But this is where the whole concept falls apart, as long as you submit something to avoid a late filing penalty then there is nothing else to do apart from submitting your end of year self assessment as per normal, those are the only figures that matter the 4 quarterly returns are irrelevant!
So what is the point?
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I don't think we're actually far apart on this.
I'm not trying to argue that the quarterly updates have some great benefit to the taxpayer. Whether they do or not is a perfectly legitimate debate.
One small distinction though: for 2026/27 HMRC aren't applying penalty points for missing the quarterly deadlines, so you don't actually need to file something by each deadline simply to avoid a penalty this year. The quarterly updates still have to be done before the tax return can ultimately be submitted.
From 2027/28 the position changes and missed quarterly deadlines can start accumulating penalty points.
My point is really more practical than political. Whatever any of us thinks of MTD, people who are caught by it now have to deal with it. For most small sole traders I'd argue the objective should simply be to make that process as painless and inexpensive as possible.
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Fair enough on CIS, you clearly know it's reported gross and I was explaining something you didn't need explaining. And you're right on the penalties, more right than I gave you credit for. HMRC's own wording is "there are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year," so points don't start until the 2027/28 updates. On accuracy, the professional view is that inaccuracy penalties don't reach quarterly updates at all. Schedule 24 FA 2007 lists the documents it bites on and quarterly updates aren't among them, and they don't meet the catch-all either because HMRC can't determine liability from an update without further inquiry. ATT say it in terms. HMRC themselves say no accounting or tax adjustments are needed, and because updates are cumulative year to date a wrong Q1 figure is cured by the corrected Q2 figure without amending anything.
So on the narrow point, you're right and I'm not going to pretend otherwise. Where I'd still push back is "file whatever figures you like," because there's a separate obligation sitting underneath it that nobody talks about. The digital records requirement is its own duty, in its own regulations, and HMRC's manual puts the penalty for failing it at up to £3,000. That has nothing to do with whether the return is right. If "whatever you like" means submitting the software's rough unadjusted output, fine, that's exactly what it's designed for. If it means not keeping the underlying records and typing a number in, that's the bit that's chargeable. There's also a positive duty to correct an error in your records as soon as you find it, not at the year end.
And a timing thing worth knowing if you've got subbies at £25k. That easement is written against the 2026/27 tax year, not against your first year in MTD. So the £30k lot in April 2027 and the £20k lot in 2028 shouldn't assume they get the same free run. Late payment is the other way round, that easement is framed as your first year in the new system, so it should follow them.
On the wider point, you won't get much of an argument from me. A subbie on £25k who's had tax deducted at source all year, filing five times to arrive at a number HMRC could work out themselves, is the least defensible bit of it. The professional bodies have said much the same about the burden at the small end. It's here regardless, which is the only reason I bother explaining it.
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My point is that the quarterly update figures are irrelevant as it is only the end of year figures that matter.
Have you got a link to the legislation which shows that HMRC can issue penalties of £3k please?
Have you got a link to the legislation which shows that HMRC can issue penalties of £3k please?
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Inaccuracy penalties do not apply to MTD income tax quarterly updates. They do apply to the annual tax return in MTD income tax in the same way that they apply to income tax self assessment returns.
so 4 nil returns and final 5th one as normal.
MTD for income tax penalties
A new system of penalties for late submission and payment of income tax has been introduced alongside Making Tax Digital (MTD) for income tax. ICAEW’s Tax Faculty explains the new rules and the other penalties that may need to be considered in the context of MTD income tax.
www.icaew.com
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