A major shake-up in the way income tax will be reported to HMRC will be an issue that GPs and practice managers need to act on, and it’s wise to start preparing now. Accountant Laurence Slavin explains the changes and how individuals can get ready.
Making Tax Digital (MTD) is a Government initiative that represents the biggest change in income tax processes for a generation. The move towards a digital tax system has been implemented in stages, with some businesses having come under its scope since 2018.
The next key date is 6 April 2026, when MTD for Income Tax comes into effect, which will have an impact on sole traders and landlords, which, of course, means it’s an issue for some GPs and practice managers.
Which individuals need to start to prepare and how?
What is MTD?
A really good question would be not only what is MTD, but also why MTD? According to HMRC, the objective of MTD is to place UK businesses on a digital footing, enabling them to benefit from a modern digital service to manage their taxes. This will, of course, give HMRC a lot more visibility into a taxpayer’s business.
The new rules obligate those affected to submit not just their annual tax return, but also four more quarterly returns. They each build on the other, so by the fourth quarterly return, an individual will have pretty much completed their accounts, and most significantly communicated these accounts to HMRC.
There is no tax payable on the four quarterly returns; it is all about information. The annual tax return is still the key document for an individual to calculate their tax liability.
Who does it affect – the practice or the individual – and when?
Starting from 6 April 2026, MTD for Income Tax affects individuals who have self-employed business income and rental income and who have combined income from those sources of more than £50,000 – known as Qualifying Income. The following table tells you what is included and not included:
| Included | Not Included |
| Locum (GP or practice manager) income paid gross | Employment income |
| GPs’, practice managers’ and hospital consultants’ private income declared personally | Partnership profits |
| A partner’s business income declared outside the partnership e.g. from locum work | Investment income |
| Rental Income from investment properties | Limited companies |
| Single-handed GP practices |
It’s important to note the threshold is £50,000 of income – not profit – so a GP with locum income of £51,000 but profits of £40,000 will be included as the requirement to register is based on income.
One technical point to also be aware of – if your self-employed income includes transitional profits from Basis Period Reform, these are excluded from your qualifying income
How do you know if you will be affected? The decision to register for MTD for April 2026 will be determined by your income tax return for 2024/25. If on that return you have breached the threshold, you have to register. As always with tax, the responsibility is yours.
From 6 April 2027, the threshold for having to register for MTD falls to £30,000, and is determined by your tax return for 2025/26.
From 6 April 2028, the threshold falls to £20,000 and, we expect at that time, it will also include profits from partnerships, so nearly all GPs will be included.
What do I have to do to comply with MTD?
You will have to submit information to HMRC by key dates using compatible software approved by HMRC. Most accounting software providers have a product available which meets all the MTD requirements. Xero has recently issued ‘Xero Simple’, for example, and a simple internet search will show you a multitude of options. Which option is most suitable for you is something to discuss with your accountant.
Once you have your software and have registered with HMRC, you will need to create digital records of your self-employment and property income. The following are examples of what is required:
| Self-employed income | Sales, takings fees | Amount of each transaction | Date received or spent | Category of income or expense |
| Self-employed expense | Cost of sales, travel, office costs, financial costs | Amount of each transaction | Date received or spent | Category of income or expense |
| Property Income | Rent, premiums, reverse Premiums and inducements | Amount of each transaction | Date received or spent | Category of income or expense |
| Property Expenses | Rent, cost of repairs, maintenance and other services | Amount of each transaction | Date received or spent | Category of income or expense |
What if I have more than one business?
You will have to create separate digital records and submit separate quarterly returns to HMRC.
What if I have more than one rental property?
UK properties (whether a single one or more) are treated as one ‘UK Property Business’. Overseas properties are treated as ‘Foreign Property Business’. In the case of jointly owned property, your share of any jointly let properties will form part of either your UK or foreign property business.
What are the key deadlines?
The dates to submit the quarterly MTD returns are:
Q1 1 April to 30 June – deadline 7 August
Q2 1 July to 30 September – deadline 7 November
Q3 1 October to 31 December – deadline 7 February
Q4 1 January to 31 March – deadline 7 May
How can I prepare for MTD?
If you are a single-handed GP, a GP or practice manager with a private income, you will most probably already have accounting software – make sure it is compatible with HMRC. Spreadsheets are not going to be compatible, and although HMRC allows Bridging Software to transfer information from spreadsheets to HMRC, it is replicating work unnecessarily.
If you have locum income or rental income, it may well be that the income and expenses operate through your personal current account. It is probably NOT advisable to link your personal account to HMRC’s software. To avoid the work required to trawl through your accounts, identifying those items that need to have a digital record, we recommend setting up a separate bank account for those items that will have to be reported. Given the time it can take to open a bank account, do this sooner than later.
What happens if I don’t comply?
There are penalties for late submissions, not keeping digital records, and not using digital links. Any fines are based on penalty points earned.
If you miss a submission date, you earn a penalty point. Once you have earned four penalty points, you have to pay a fine of £200. For late submissions after that, each late submission gets you a fine of £200.
If you don’t have functional compatible software, there is a fine of up to £400.
Can I be exempted from having to use MTD?
You can apply for exemption from MTD on the grounds of:
- Age
- Disability
- Location
- You are a practising member of a religious order whose beliefs are incompatible with using electronic communications.
We don’t expect exemptions will be granted easily, however.
What happens if my Income stops or falls below the qualifying threshold?
Once you are in MTD, you will have to continue to submit quarterly returns for three consecutive years after your income has fallen below the qualifying threshold.
What should you and your accountant be doing now?
If you think you will be affected by MTD for Income Tax, you should be talking to your accountant now to discuss the appropriate software, banking and rental declarations.
Like us, your accountant is probably running pilots to see how MTD will affect the work they do. We will be offering a variety of support levels from a light touch to full MTD compliance, depending on the client’s accounting ability and their preference.
The better prepared you are, the less traumatic the change should be.
Laurence Slavin is a partner with Ramsay Brown LLP, which specialises in the finances of GPs and healthcare. He can be contacted at [email protected]
