Making Tax Digital (MTD) for Healthcare Professionals
What is MTD for Healthcare Professionals?
HMRC continue to digitalise the UK tax system. Digital means on a computer / tablet / mobile phone !
MTD changes how many self employed people maintain their accounting and bookkeeping records, and how these records are sent to HMRC.
MTD will be phased in for Self Employed people (Income Tax) from April 2026.
These new requirements are nothing to do with VAT which is completely separate.
MTD – who is in – who is not in
MTD will apply to individuals who carry on a service or trade ie. self-employed / sole traders.
MTD will not apply to partnerships at this stage.
No date has yet been set for MTD for limited companies.
When does MTD Start?
- from 6th April 2026, where total turnover exceeds £50,000
- from 6th April 2027, where total turnover exceeds £30,000
- from 6th April 2028, where total turnover exceeds £20,000
- The tax return for 2024/25 will be used to decide if compliance is required from 6th April 2026, 6th April 2027 or 6th April 2028.
HMRC will determine your start date by reviewing your Self Assessment 2024/25, and send you a letter.
Wording of Healthcare Associate Contracts
For Associate healthcare professionals, there is a further consideration.
Some Associates’ contracts are worded so that the total patient fees are due to the Associate, but then a rent and / or service charge for the clinic services is deducted before the Associate is paid. With such a contract, it is the total patient fees which determines the turnover for the start date, ie. 2026, 2027 or 2028, not what the Associate eventually receives net of the rent and / or service charge.
Some Associates’ contracts are a simple commission basis, in which case the total commission received in a tax year is the turnover for the MTD registration.
What are the MTD requirements?
Self employed people will be required to
- Record business transactions (eg. income and expenses) digitally, using a software product or spreadsheet. Paper records will no longer be legal!
- Submit quarterly returns to HMRC directly from the digital records.
- Finalise the tax position after the end of the tax year, as in the past and currently, and before the next 31st January.
- The quarterly returns should be submitted using compatible software that can communicate with HMRC’s computer.
Quarterly returns contain a summary of transactions. The final Self Assessment – year end tax return – is also required by 31st January following the previous 5th April (as currently), with any necessary adjustments.
Please note critically, MTD means an uninterrupted digital record flow from the software to HMRC submission.
You will not be able to keep your own designed spreadsheet and hand-key your MTD return to an HMRC online app/system, because there won’t be one.
When are the returns due?
The quarters and deadlines for submitting MTD returns are:
- 6th April to 5th July: 7th August
- 6th July to 5th October: 7th November
- 6th October to 5th January: 7th February
- 6th January to 5th April: 7th May
What does it all mean in practical terms for healthcare professionals?
- Neither cash book, nor paper records, nor a self designed spreadsheet, will be possible.
- Check contracts for correct calculation of total fees (see above).
- Keep digital records on HMRC approved software – we recommend and support FreeAgent
- Keep digital records up to date.
- The tax year is fixed at 6th April to the following 5th April (reference “Basis Period Reform”).
- It’s probably going to be better having a separate business bank account – which may be advantageous to directly feed your business transactions into the online software which will probably save you some bookkeeping time.
- There will be an initial steep learning curve when getting used to the new software, and errors may be inevitable.
- MTD may be the trigger point for healthcare professionals appointing an accountant to support the software / recording / MTD returns and advise on Income Tax.
- Extra accounting and software costs may mean you increasing your client fees.
Recommended Software
- FreeAgent (our online software preference).
- For our current clients, our free spreadsheet is MTD compliant: MTD submissions can be uploaded from our free spreadsheet via IRIS, our preferred tax submission system.
- QuickBooks (we also support but strongly prefer FreeAgent).
There is an argument that it may be better to start in 2025/26 to get used to the new software in a less time-pressured way, for the ongoing attention to detail, before accuracy becomes more relevant
Business Bank Account
A separate business bank account is recommended if you are going to use approved online accounting software, eg. FreeAgent.
This is because FreeAgent will automatically connect to your business bank account and upload all the bank transactions to FreeAgent, saving you laborious bookkeeping time.
If you connected the online software to a private bank account, your private transactions would also be uploaded, and therefore clutter the business bookkeeping and create more work sorting it out.
The good news is that a Mettle bank account is free in conjunction with you using FreeAgent, which is also free.
Accountants – what’s next?
Talk to us, or your Accountant.
Switch to limited company?
Would it be beneficial to practice / trade through a limited company to avoid MTD? That’s your choice, limited companies have more bookkeeping and tax complexities, and company law requires bookkeeping to be up to date all the time. Accounting fees for limited companies could be double that for self employed / sole traders.
What does MTD not mean?
The due dates for paying tax will not change under MTD, at this time.
Please also read our Payments On Account page.
Exceptions
Some people may be able to obtain an exemption:
https://www.gov.uk/guidance/apply-for-an-exemption-from-making-tax-digital-for-income-tax
HMRC guidance on “Assisted digital and digitally excluded support needs”
https://www.gov.uk/government/publications/assisted-digital-and-digitally-excluded-support-needs