Article By Coconut

Making Tax Digital (MTD) will be here before we know and with it comes a whole world of rumours, confusion and myths. Here, we bust some of the most common so you know exactly what to expect.

Myth 1: MTD means I need to submit a tax return every three months.

Not true. While you do need to submit quarterly updates, they’re not full tax returns. Instead, think of them as snapshots of your business figures throughout the year.

Myth 2: I need to hire an accountant.

You can file yourself. In fact, HMRC has tried to make MTD ITSA as easy as possible, so there is no need for an accountant. You will still need to have some knowledge of what is required but you don’t need a professional. That being said, some people may choose to use an accountant for peace of mind.

Myth 3: I have to use complicated accounting software.

Absolutely not. The best software is the one that’s easy to use, designed for your specific needs and simplifies compliance, just like our partner, Coconut. HMRC has even provided a list of MTD-recognised software to help make your decision easier.

Myth 4: I can still use spreadsheets.

HMRC requires digital records so spreadsheets alone won’t be compliant – unless you use a bridging software. Remember, you can’t copy and paste entries either so if you currently only use a manual spreadsheet, you need to think about what you’re going to do.

Myth 5: MTD will make taxes harder.

Any change can feel daunting – and confusing – but MTD is being brought in to make tax easier by spreading admin across the year. Quarterly updates mean smaller and more manageable tasks.

Myth 6: Quarterly updates will be time-consuming.

Not with the right tool. In fact, it’s believed that quarterly updates will speed up tax season obligations and make the final assessment quicker and more accurate.

Myth 7: MTD won’t apply to landlords.

Landlords earning over the threshold will need to comply in the same way as self-employed professionals. If properties are owned in joint names, it will be their share of the rental income that contributes towards the thresholds.

Myth 8: I can ignore MTD until it starts.

Technically yes but ignoring any big changes will only result in a stressful scramble later down the line. Getting set up now means you have time to settle into a different process without any pressure.

Myth 9: MTD is just about compliance.

No, MTD has been designed to help you understand your finances, reduce tax surprises, keep better records, avoid penalties and make informed decisions.

Myth 10: I won’t need an app for this.

You’ll need approved software to keep digital records, categorise income and expenses, submit quarterly updates and prepare for the final assessment. Choosing software that also comes with an app can make responsibilities simpler.

The truth

MTD doesn’t have to be scary. In fact, with the right support, it can actually make your life easier.

About Coconut

Coconut is the easy way to sort your finances without the headache.

Built with sole traders in mind, it helps you track income, log expenses, and keep on top of your taxes – without piles of paperwork or confusing spreadsheets.

Whether you’re on site or on the move, Coconut makes it simple to know what you’re earning, what you’re owed, and how much tax you need to set aside.

Less faff, more graft.

Get started with Coconut today and take a 30 day free trial and be prepared for MTD!

See just how easy it is here!