You need enough to prepare a correct return and to prove the figures if HMRC asks: all sales and other income, all business expenses, bank and cash records, and — if you are VAT registered — a VAT account.

Sole traders and landlords must keep records for at least five years after the 31 January submission deadline for the relevant tax year, which in practice means nearly six years from the end of the tax year itself.

No — a clear digital image is an acceptable record, and you can throw the paper away once it is captured, with one significant exception.

Legally yes if you are a sole trader or landlord, but it is the single most expensive habit we see.

Record them at the point they arise, every day, and bank them intact rather than spending out of the till.

Cash basis counts income when the money arrives and expenses when they leave; accruals counts them when the work is done or the cost is incurred, regardless of payment.

Yes, and it is a routine job rather than a confession. Catch-up work starts with whatever exists — bank statements, an app full of receipts, a carrier bag — and rebuilds each year in sequence, because you cannot do the recent ones without the opening position from the older ones.

Do it yourself if your affairs are simple and you will genuinely keep up; outsource if the honest answer to that is no.

Claim the business proportion, and be able to explain how you arrived at it. A phone used 70% for work means 70% of the bill is allowable; a van used privately at weekends needs a mileage-based restriction.

Broadly the same work, done continuously rather than in one annual panic. The obligations do not change — the same records, the same evidence — but they must be kept digitally and, because you are summarising to HMRC every quarter, they have to be reasonably current rather than reconstructed in January.

The Construction Industry Scheme requires contractors to deduct tax from payments to subcontractors and pay it to HMRC on their behalf.

20% if they are registered with HMRC, 30% if they are not, and nothing at all if they hold gross payment status — but you do not choose which, you verify.

Monthly, by the 19th of the month following the tax month, which runs from the 6th to the 5th.

It depends on your structure, and the difference is significant for cash flow. A sole trader or partner reclaims through Self Assessment: the deductions are credited against your tax bill, and because 20% of gross labour usually exceeds the tax actually due on the profit, most subcontractors end up owed a refund each year.

Gross payment status means contractors pay you in full with no deduction, and you settle your tax through your return instead.

Possibly, and this is the CIS trap that catches businesses who have never thought of themselves as construction.

The VAT domestic reverse charge applies to construction services between VAT-registered businesses where the recipient is CIS-registered and is not the end user.

Yes — a payment and deduction statement for every subcontractor you deducted from, within 14 days of the end of the tax month.

Enough to reconstruct every payment and deduction: gross amounts, the materials element, the deduction, verification numbers for each subcontractor, and copies of the statements you issued.

CIS itself is untouched — monthly returns, verification and deductions all work exactly as they do now, and MTD does not reach them.

Setting up for Making Tax Digital is a one-off project with four parts: choosing HMRC-recognised software that suits how you actually work, getting your records into it, connecting it to HMRC, and agreeing who files what from now on.

Aim to be fully set up at least one full quarter before your mandation date, and ideally two.

Yes, but they have to be digitally linked to HMRC rather than retyped into a form. Spreadsheets are still legitimate digital records — what MTD prohibits is manually copying a figure from one place to another.

A digital link is any transfer of data between systems that happens without a human retyping or copy-pasting it.

The right answer depends on your trade far more than on feature comparisons. Any HMRC-recognised package will keep you compliant, so the question is which one you will actually keep up with.

Our setup work is quoted as a fixed fee once we have seen your records, and for most sole traders and landlords it is a few hundred pounds rather than a few thousand.

No. MTD for Income Tax applies from April 2026 if your qualifying income is above £50,000, from April 2027 above £30,000, and from April 2028 above £20,000.

Yes, and it is more common than starting on 6 April. Mid-year setup means we bring in your transactions from the start of the tax year so the software holds a complete year, not a partial one — otherwise your final declaration will not reconcile.

Yes — we handle the agent authorisation and the software authorisation, but there are two steps only you can do.

Genuine exemptions exist, but they are narrower than most people hope. HMRC grants digital exclusion where it is not reasonably practicable for you to use digital tools — because of age, disability, location without reliable internet, or religious belief.

Every VAT-registered business, without exception for size. This is the point most people get wrong, because MTD for VAT arrived in stages: it applied to businesses above the registration threshold from April 2019, and was extended to all VAT-registered businesses — including voluntarily registered ones below the threshold — from April 2022.

They are two separate regimes that happen to share a name, and confusing them causes a lot of unnecessary worry.

Yes, provided the spreadsheet is digitally linked to bridging software rather than read by a human who then types the figures into HMRC.

You need your business name and address, VAT number, any schemes you use, and — the part that matters — a digital record of every supply you make and receive, showing the time of supply, the value, and the VAT rate applied.

Correct — copy and paste, and manual retyping, both break the digital link and are not permitted.

Late VAT returns attract penalty points under the same points-based system that applies across MTD, with a financial penalty once you hit the threshold for your filing frequency, and points expiring after a period of compliant filing.

The group has one VAT number and files one return, so the digital record-keeping requirement attaches to the group as a whole and the consolidated figures must reach HMRC through digital links.

Yes. MTD is about how records are kept and returns are submitted, not how VAT is calculated, so every scheme is in scope.

Only on the digital exclusion grounds, and they are narrow: age, disability, remoteness of location with no reliable internet, or religious belief that precludes using computers.

You are in MTD for VAT from your first return, so there is no grace period to grow into. That means MTD-compatible software connected to HMRC before your first VAT quarter ends, not after.

A quarterly update is a summary of your income and expenses for a three-month period, sent to HMRC from your software.

No. This is the single biggest misconception about MTD and it causes real anxiety. Quarterly updates are information, not payment.

Very little, which surprises people. Quarterly updates are explicitly provisional, and the mechanism for fixing an error is simply to include the corrected figure in a later update or at the final declaration — there is no amendment form, no penalty for an honest mistake, and no need to phone anyone.

Late submissions accrue penalty points rather than an immediate fine. You get a point per missed deadline, and only when you reach the threshold for your filing frequency does a fixed financial penalty apply.

The final declaration replaces the Self Assessment return and is due on the same date, 31 January after the tax year ends.

Software is very good at recording what happened and completely incapable of deciding what it means.

Each source is reported separately, so a sole trader who also lets a flat sends updates for the trade and updates for the property business.

File it as soon as you notice, and include the period in your next submission if the deadline has passed.

Yes, and it is what most of our MTD support clients want. The arrangement is straightforward: you keep your records current in the software — mostly just approving categorised bank transactions and photographing receipts — and we review the quarter, query anything that looks wrong, and submit.

Not immediately, and not on your own say-so. Once you are in MTD you stay in until HMRC agrees you can leave, and the test looks at a sustained fall rather than one quiet year.

Before your first payday, not after it. You need to register as an employer with HMRC once you take on anyone paid above the National Insurance lower earnings limit, anyone who has another job, or anyone receiving a pension — and directors count as employees for this.

Real Time Information means telling HMRC about every payment to every employee on or before the day you pay them, rather than once a year.

No. Payroll has been digital and real-time since RTI arrived in 2013, so there is nothing for MTD to fix and payroll sits entirely outside the regime.

By the 22nd of the month following the tax month if you pay electronically, or the 19th if you still pay by post.

Yes, if you have any staff. Every employer must put eligible workers into a workplace pension and contribute — there is no small employer exemption.

If you take a salary, yes — a director is an employee for PAYE purposes and needs a scheme, RTI submissions and payslips like anyone else.

It reduces your employer National Insurance bill by up to a set annual amount, claimed through your payroll software as an EPS.

The recurring ones are the FPS on or before every payday and PAYE payment by the 22nd of each month, and then a small cluster after the tax year ends.

It is determined by the reality of the working relationship, not by what the contract says or what both parties would prefer.

Yes, and it is one of the jobs where outsourcing is easiest to justify, because the downside of getting it wrong lands on your staff.

Yes — QuickBooks is recognised by HMRC for both MTD for VAT and MTD for Income Tax, and Intuit has been in the MTD programme since it began.

Fewer than the sales page suggests, in most cases. The tiers step up roughly from a simple sole trader product, through a basic small business plan, to ones that add bill management, multi-currency, projects and stock.

Yes, and it is the most common QuickBooks setup we do. The work is mostly in the migration rather than the software: we agree your opening balances with whoever prepared your last accounts, import your customer and supplier lists, bring in transaction history from your bank, and set up a chart of accounts that reflects your trade instead of the generic default.

A bank feed connects your account through open banking so transactions arrive automatically, usually the next day, and rules then categorise them for you.

Yes, on the Plus tier and above — and this is usually the deciding factor for anyone in construction.

The mobile app can track journeys automatically using your phone's GPS, and you swipe each one as business or personal.

Yes, but do it at a year end if you possibly can. Migration tools and conversion services move the core data — customers, suppliers, chart of accounts, and usually a couple of years of transactions — but the things that do not carry across are the things you built: bank rules, invoice templates, recurring transactions, tracking structures, and any app integrations, all of which need rebuilding.

It depends on your tier, and this is one of the real differences from some competitors, which include unlimited users at every level.

Only if you have employees, and not necessarily even then. QuickBooks payroll is a separate subscription that bolts onto your accounting and handles RTI submissions, payslips and pension uploads, with the advantage that the wage journals post straight into your books without anyone rekeying them.

About two weeks of elapsed time for a typical sole trader or landlord, though very little of that is work at your end.

Anyone whose income is not fully taxed at source or whose circumstances require HMRC to look at the whole picture.

Register by 5 October following the end of the tax year in which you started; file a paper return by 31 October; file online by 31 January; and pay by 31 January.

Payments on account are advance instalments towards the following year's tax, each 50% of your previous year's liability, due 31 January and 31 July.

£100 immediately, whether or not you owe any tax, and it escalates from there. After three months, daily penalties of £10 accrue up to £900.

Anything incurred wholly and exclusively for the business. That covers stock and materials, staff costs, premises, insurance, professional fees, marketing, phone and internet, software, tools, and travel that is not ordinary commuting.

The return disappears; the obligation does not. If you are mandated into MTD for Income Tax, you send quarterly updates and then a final declaration instead of a Self Assessment return — but the final declaration does the same job, falls on the same 31 January date, and carries the same legal weight.

Probably, once the side income exceeds the trading allowance of £1,000 gross. Below that you can ignore it entirely; above it, you either claim the allowance against the income or deduct actual expenses, whichever gives the better result, and file a return.

Everything supporting every figure, and more than you think. For self-employment: sales and expense records with receipts, bank statements, and details of business assets.

File the return anyway, on time, and then talk to HMRC about paying. This is the most important thing in this whole list and the one people get wrong most often, because the instinct when you cannot pay is to avoid the whole subject.

Yes, within twelve months of the filing deadline — so for the year ended 5 April 2026, you have until 31 January 2028 to amend the return you filed by 31 January 2027.

Tax planning arranges your affairs to use reliefs the way Parliament intended; avoidance contrives arrangements to produce a result Parliament never intended.

Sometimes, and less often than people assume. The headline comparison — corporation tax plus dividend tax versus income tax plus National Insurance — usually favours incorporation once profits are comfortably above what you need to live on, because you can leave money in the company and control when you extract it.

The usual shape is a modest salary set around the National Insurance thresholds, with the balance taken as dividends.

Pension contributions are among the few genuinely large, entirely uncontroversial reliefs left.

Yes, if the arrangement is genuine. Paying a spouse for real work at a commercial rate is legitimate and can be efficient, particularly where their own allowances and lower rate bands are unused.

There are more routes than salary and dividends, and the mix matters more than any single one.

Timing matters more than most people realise, because relief lands in the period of purchase and a few days either side of your year end can move a deduction by a full year.

The restriction on mortgage interest is the defining issue, and it has reshaped the arithmetic for leveraged landlords.

Before the year end, and preferably not in the last fortnight of it. Almost everything that works — pension contributions, equipment timing, dividend timing, salary levels, capital gains harvesting, ownership changes — has to happen before 5 April, or your company's year end, to affect that year.

It improves it, which is the part of MTD nobody sells. The old rhythm was that you found out how your year had gone the following January, by which point every decision that could have changed it was ten months in the past.

When your VAT-taxable turnover exceeds £90,000 in any rolling twelve-month period, or when you expect to exceed it in the next thirty days alone.

It depends almost entirely on who your customers are. If you sell to VAT-registered businesses, registering is often free money: they reclaim the VAT you charge so your price is effectively unchanged, while you start reclaiming VAT on your own costs.

One month and seven days after the end of your VAT period, for both the return and the payment.

The flat rate scheme lets you charge VAT normally but pay HMRC a fixed percentage of your gross turnover instead of the difference between output and input tax, and you generally cannot reclaim VAT on purchases.

You can reclaim VAT on goods and services bought for business purposes where you hold a valid VAT invoice and the supply was standard or reduced rated.

They look similar on an invoice and behave very differently. Zero-rated supplies are taxable at 0% — most food, children's clothes, books, new residential construction — and because they are taxable you can still reclaim input VAT, which is why a zero-rated business often reclaims more than it pays.

Small errors can be corrected on your next return; larger ones must be disclosed to HMRC separately.

Yes, within time limits, and it is regularly missed. For goods you still hold at registration — stock, equipment, tools, a laptop — you can reclaim VAT on purchases made in the four years before registration, provided they were bought by the same legal entity for business purposes and you still have them.

It affects you if you work in construction and supply another VAT-registered business that is CIS-registered and is not the end user.

Late filing earns a penalty point rather than an immediate fine, with a financial penalty once you reach the threshold for your filing frequency, and points expiring after a run of on-time returns.

Yes — Xero is HMRC-recognised for MTD for VAT and MTD for Income Tax, and it was among the first packages through the door on both.

The entry plan is cheaper than people expect and more limited than they notice. Xero's lowest tier caps how many invoices and bills you can enter each month, and that cap is where most businesses outgrow it — not through some grand feature need, but by quietly hitting a limit in a busy month and finding they cannot raise an invoice.

Unlimited, on every plan, and it is one of Xero's genuine structural advantages over competitors that bill per seat.

Hubdoc is Xero's receipt and bill capture tool, and it is included with Xero subscriptions rather than charged separately.

Reconciliation is the centre of how Xero works, more so than in most packages, and understanding that makes the whole thing click.

Yes, but it is an add-on rather than a standard inclusion, and it needs enabling on a suitable plan.

Tracking categories let you tag transactions along a dimension of your choosing — property, site, department, vehicle — and then report profitability by it.

Yes — from spreadsheets, from desktop packages, or from another cloud product. The core data moves reasonably well: chart of accounts, contacts, opening balances, and usually a couple of years of transaction history.

Xero connects to a very large ecosystem of third-party apps — stock, ecommerce, job management, expenses, industry-specific tools — and it is the largest of the main packages.

Roughly two weeks, of which your involvement is perhaps two hours. We need access to your records and your last set of accounts, and you need to authorise the bank feed and complete the HMRC sign-in, since neither can be done on your behalf.

There is no single perfect option. Popular MTD-compatible choices include Xero, QuickBooks Online and FreeAgent.