Welcome To Making Tax Digital With RIFT

Making Tax Digital (MTD) is HMRC’s initiative to transform the UK tax system by making it fully digital. The goal is to make tax administration more effective, efficient, and easier for taxpayers.

If your income was over £50,000 last year it is compulsory to register for MTD with HMRC by 6th April 2026 as a legal requirement.

Once Registered With MTD You Will:

  • Need to keep digital records using MTD-compatible software (paper records will no longer be allowed)
  • Submit quarterly updates to HMRC as well as annual tax returns
  • Have a more real-time view of tax obligations

We can take care of all the new paperwork and calculations for you throughout the year, simply choose one of our subscription packages and enjoy the peace of mind that comes with support from our specialist service team.

Call us on 01233 653971 and our specialist team can help you.

When you need to register

When Will MTD Affect Me?

Phase 1: April 2026

Threshold is income of £50,000

Self-employed individuals and landlords with income over this amount must join MTD for Income Tax.

Phase 2: April 2027

The threshold drops to £30,000.

 This will bring many more construction workers into MTD

Phase 3: April 2028

The threshold drops to £20,000.

This will bring most construction workers into MTD

Let us handle it for you

RIFT MTD (Making Tax Digital) Subscriptions

We can take care of all the new paperwork and calculations for you throughout the year, simply choose one of our subscription packages and enjoy the peace of mind that comes with support from our specialist service team.

MTD Essentials

Perfect for keeping costs down through the year and you’re happy to pay for your annual tax return separately at year-end

  • £10/month (Quarterly submissions only)
  • Annual total: £474

£120 monthly + £354 year-end tax return

MTD Total Care

Our most popular choice – everything you need for your quarterly submissions and annual self assessment tax return included

  • £35/month (Quarterly submissions + annual tax return)
  • Annual total: £420

Saves £91.50 vs MTD Essentials over the course of the year.

Frequently Asked Questions About MTD

Yes, for Self Employed and income from property of more that £50,000. Those above £30,000 will be included from April 2027

Yes, as well as your 4 quarterly updates, a final tax return (also called a Final Declaration)  will still need to be submitted by the following 31st January.

The final declaration

After the tax year ends (5 April), you have until 31 January of the following year to submit a final declaration.

This is where you:

  • Review and finalise your total income and expenses for the full year
  • Claim any additional reliefs or allowances
  • Declare the information is correct and complet

Think of quarterly updates as progress reports and the final declaration as your official statement.

Under MTD for Income Tax, you’ll submit quarterly updates instead of one annual tax return.
The quarterly cycle:

Each tax year is divided into four quarters:

  • Quarter 1: 6 April to 5 July (deadline: 5 August)
  • Quarter 2: 6 July to 5 October (deadline: 5 November)
  • Quarter 3: 6 October to 5 January (deadline: 5 February)
  • Quarter 4: 6 January to 5 April (deadline: 5 May)

In your quarterly update you must report on:

  • Total income received during the quarter
  • Business expenses incurred during the quarter
  • CIS deductions (if applicable)

These are summary updates—you’re reporting the figures calculated by your MTD-compatible software based on the digital records you’ve kept.

For construction industry workers, understanding how MTD interacts with the Construction Industry Scheme is crucial.

CIS deductions still apply:

MTD doesn’t replace CIS. If you’re a subcontractor, contractors will still deduct tax from your payments at 20% or 30% (or 0% if you have gross payment status). These deductions continue exactly as before.

Quarterly updates include CIS information:

When you submit your quarterly MTD updates, you’ll report your construction income and the CIS tax that’s been deducted. Your MTD-compatible software should help you track these deductions throughout each quarter.

CIS deductions count toward your tax bill:

The tax already deducted under CIS is credited against your total tax liability. At the end of the tax year, HMRC calculates your final tax bill and offsets the CIS deductions. If too much was deducted, you receive a refund. If too little, you pay the difference.

Example scenario:

Imagine you’re a self-employed electrician. In quarter one, you earn £15,000 from construction work, with £3,000 deducted under CIS (20%). When you submit your MTD quarterly update, you report the £15,000 income and note the £3,000 already paid. Your software calculates whether you’re on track for a refund or additional payment at year-end.

Importance of accurate contractor statements:

You need the monthly payment and deduction statements from your contractors to complete your MTD updates accurately. Keep these statements organised and check them against your own records.

No, you do not legally need a dedicated business bank account for Making Tax Digital (MTD) if you are a sole trader or landlord, but it is strongly recommended to simplify compliance. 

While HMRC does not require a separate business account to file MTD updates, it makes digital record-keeping much easier and reduces the risk of errors. 

Why a Business Account is Recommended for MTD

  • Easier Record Keeping: MTD requires digital records. A separate account makes it much easier to track income and expenses compared to digging through personal transactions.
  • Automated Software Integration: Business bank accounts usually offer “Open Banking” feeds, allowing MTD-compatible software to import transactions automatically.
  • Reduced Error Risk: Mixing personal and business spending in a personal account can lead to missed expenses or incorrect tax reporting.
  • Compliance with Bank Terms: Many personal bank accounts prohibit their use for business purposes. Using one could lead to your account being frozen or closed.

What About Limited Companies?

If you operate through a limited company, you must use a separate company bank account, as it is a separate legal entity

No, it only changes how and when you report your income.

There are no changes to making payment.

You make 4 quarterly submissions and your final declaration and you pay your tax bill as usual.

HMRC can issue fines or penalties for missed submissions.

MTD  has introduced a points-based penalty system for late submissions and financial penalties for late payment.

Late submission penalties:

  • HMRC uses a points system. Each time you miss a quarterly update deadline, you receive a penalty point.
  •  Once you reach a threshold of points, you face a £200 penalty.
  •  Further missed deadlines result in additional £200 penalties.

How points accumulate:

  • First late submission: 1 point
  • Second late submission: 2 points
  • Once you reach the points threshold (typically 4 points for quarterly submissions): £200 penalty
  • Each subsequent late submission: Another £200 penalty

Points reset:

If you submit all your required updates on time for a full compliance period (usually 24 months), your points reset to zero.

Late payment penalties:

  • These are separate from submission penalties and apply if you pay your tax late:
  • First late payment penalty: 2% of the tax unpaid at 15 days after the deadline
  • Second late payment penalty: 2% of the tax still unpaid at 30 days after the deadline
  • Additional interest charges on unpaid tax

Example scenario:

  • Jordan misses his Quarter 1 update deadline (5 August).
  • He receives 1 penalty point.
  • He then misses Quarter 2 (5 November) and receives another point, bringing his total to 2 points.
  • He submits Quarter 3 and Quarter 4 on time. He needs to maintain compliance to avoid reaching the 4-point threshold that would trigger a £200 penalty.

How to avoid penalties:

  • Set up calendar reminders for each quarterly deadline
  • Use software that sends automatic deadline notifications
  • Submit updates early rather than waiting until the deadline
  • Keep digital records up to date throughout the quarter
  • Consider working with an accountant or bookkeeper

To comply with MTD, you must use software that meets HMRC’s standards.

What makes software MTD-compatible:

  • Keeps digital records of income and expenses
  • Calculates and submits quarterly updates to HMRC digitally
  • Preserves digital records in the required format
  • Connects to HMRC systems through an Application Programming Interface (API)

You cannot:

  • Keep manual paper records and type totals into HMRC’s website
  • Use basic spreadsheets unless they’re part of MTD-compatible software with bridging software

Features to look for (construction-specific):

  • CIS deduction tracking and integration
  • Mobile apps for recording expenses on-site
  • Receipt capture using your phone camera
  • Mileage tracking
  • Integration with your bank account for automatic transaction imports
  • VAT capability if you’re VAT-registered

Finding compatible software:
HMRC maintains a list of MTD-compatible software providers on GOV.UK. You can filter by type of tax (Income Tax, VAT), business size, and features needed.

If you are a RIFT customer your subscription will include access to software as part of the service.

Yes, it is the value of your total income from in the tax year before any deductions have been made, such as expenses.

If you earned over £50,000 combined from all sources and income and properly you have crossed the MTD threshold.

If you have income from employed work, self-employed work and rental income only the total of the last two will count.

Qualifying income is that from self employment and income from property. This is because no tax has been paid on that income to HMRC.

PAYE (where you are employed and that employer sends your tax to HMRC) would not be considered for the total income threshold as you have already paid tax on it through your employer.

Yes. Income from self employment, UK property and foreign property are in scope of MTD.

The total is your gross income from self employment and rental income.

You’ll need to keep digital records for all of them and we’ll send updates for each income stream separately.

We’ll manage this for you. You’ll need to keep digital records for Income Tax if all of the following apply:

  • You’re an individual registered for Self-Assessment
  • You get income from self-employment or property, or both
  • Your combined qualifying income is more than £50,000

The qualifying income thresholds would apply to your share of income from jointly owned property.

Partnerships are not currently in scope of MTD.

Not until April 2027

Not yet.

Currently it is planned that this group will be included from April 2028.

While MTD requires significant changes, it offers several advantages for construction workers and contractors:

Real-time tax visibility:
Instead of waiting until the end of the tax year to discover your tax bill, MTD gives you a clearer picture throughout the year. You’ll know approximately what you owe each quarter, helping you plan and budget more effectively.

Reduced errors:
Digital record-keeping and automatic calculations significantly reduce mathematical errors and missed deductions. MTD-compatible software can automatically categorise expenses and calculate allowances, reducing the risk of underpaying or overpaying tax.

Better cash flow management:
Quarterly updates help you spread your tax planning across the year. You can set aside money gradually rather than facing a large unexpected bill. For construction workers managing irregular income and CIS deductions, this visibility is particularly valuable.

Integration with CIS:
MTD software can integrate CIS deductions directly into your tax calculations. The tax already deducted under CIS is automatically accounted for, giving you a clearer view of whether you’ll receive a refund or owe additional tax.

Time savings in the long run:
While there’s an initial learning curve, digital record-keeping can save time compared to managing paper receipts and manual bookkeeping. Many MTD-compatible apps allow you to photograph receipts, track mileage, and categorise expenses on the go.

Improved compliance:
Regular quarterly submissions mean you’re less likely to miss deadlines or forget important deductions. The software prompts you to submit updates, reducing the risk of penalties.

If you are a RIFT customer your subscription will include access to software as part of the service.

If you choose to do your own submissions HMRC has estimated that the initial cost to purchase the software will be around £320 and then £110 per year on an ongoing basis.

Some estimates have put the total investment required at four times that cost.