Everything you need to knowWelcome To Making Tax Digital With RIFT

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.

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

There are no changes to making payment.

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

Yes gross income (or turnover) is before any deductions such as expenses. The qualifying income thresholds would apply to your share if income from jointly owned property.

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

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

Partnerships are not currently in scope of MTD.

Yes. Income from self employment, UK property and foreign property are in scope of MTD. It is gross income from self employment and rental income.

Not until April 2027

Not yet. Currently it is planned that this group will be included from April 2028.

Qualifying income is that from self employment and income from property. PAYE would not be considered in the qualifying income threshold test.

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

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.

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.

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.

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.