MTD – more admin than expected?

[justintime]

But now for example, in a couple of years you will have a sub contractor on £25k a year who does their own tax returns, no need for an accountant or software as all they have is income which is already having CIS tax deducted, they now need to be enrolled in MTD and submit quarterly updates using software.

For CIS clients with just income it should be much easier. From my understanding the CIS deductions will be fed into the MTD software so shouldn't even need to do anything other than press the QU button. I only have one CIS client over 50k so we'll see how it works in action.

 

[DavidAshdown]

But it is all about compliance, if not everyone would ignore it for the total waste of time it is, let’s face it you can submit absolute rubbish figures every quarter and as long as the end of year tax return is accurate then that is all that matters.
Clients with Accountants or those who already submit using software then there are no problems, but what about the rest ?
Self Assessment was brought in to help businesses submit their own accounts, HMRC did not want Accountants involved!
But now for example, in a couple of years you will have a sub contractor on £25k a year who does their own tax returns, no need for an accountant or software as all they have is income which is already having CIS tax deducted, they now need to be enrolled in MTD and submit quarterly updates using software.
HMRC brought in MTD saying they could not foresee a cost to the businesses after the initial set up, this I believe is total nonsense.

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.

 

[DWS]

For CIS clients with just income it should be much easier. From my understanding the CIS deductions will be fed into the MTD software so shouldn't even need to do anything other than press the QU button. I only have one CIS client over 50k so we'll see how it works in action.

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.

 

[paulears]

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?

 

[DavidAshdown]

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?

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.

 

[Newchodge]

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?

Just as an aside - you don't run payroll do you? If you do, please don't use xero payroll.

 

[paulears]

Just as an aside - you don't run payroll do you? If you do, please don't use xero payroll.

Hi Cyndy. no I don't - but intrigued by this one. I assume it's a bit rubbish at it?

 

[Newchodge]

Hi Cyndy. no I don't - but intrigued by this one. I assume it's a bit rubbish at it?

I have heard other payrollers say that it was designed by accountants, not payrollers! I haven't used it.

 

[numbersrule]

Just as an aside - you don't run payroll do you? If you do, please don't use xero payroll.

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.

 

[Newchodge]

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.

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.

 

[EnterprisePro]

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...

 

[numbersrule]

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...

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.

 

[lukab]

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?

 

[Paul Kelly ICHYB]

think, is this an orchestrated plan to make us to pay taxes quarterly rather then wait until the 31st of January?

Is that a bad thing?

 

[lukab]

Is that a bad thing?

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?

 

[Paul Kelly ICHYB]

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?

 

[DontAsk]

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?

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?

 

[lukab]

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?

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.

 

[DWS]

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.

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.