How is Making Tax Digital affected by maternity leave?

With it being the biggest overhaul of tax filings for decades, Making Tax Digital (MTD) for Income Tax is set to pull in more and more people over the course of the next few years.

This means that MTD needs to work alongside different people in different stages of life and the rules around this are beginning to be clarified.

One of the most common ways for income to alter dramatically is when people go on maternity leave and you may think this affects your MTD obligations.

The reality is more nuanced so it is vital you understand what your MTD obligations are when you are on maternity leave.

Do I need to prepare for MTD if I am on maternity leave?

The exact nature of your maternity leave will be the deciding factor for whether you need to prepare for MTD.

If your maternity leave means that you will temporarily be receiving less qualifying income or no qualifying income at all, then it will not impact your MTD obligations at all.

This is due to MTD requirements being calculated based on qualifying income during the 2024/2025 tax year.

This means that any sole trader, self-employed individual or landlord who earned above £50,000 in that time will be expected to adopt MTD this year, even if their income has diminished since then.

However, if maternity leave is the start of a new life path for you and you will not be acquiring a qualifying income going forward, then you should let HMRC know that this is the case and you will no longer be expected to adopt MTD.

Similarly, if your qualifying income drops below the threshold for three consecutive years, then you will stop being obliged to follow MTD requirements.

In that instance, you should be aware that the thresholds are falling over the next few years, so you may still be expected to prepare for MTD even if your income is not what it once was.

What should I do to prepare for MTD if I am on maternity leave?

As you prepare to welcome a new life into the world, keeping up with tax filing may not be the highest thing on your list of priorities.

However, you will still be expected to adopt digital record-keeping in order to meet the new requirements of quarterly filings and an annual submission.

There are no penalties for missing deadlines this year, but it is still worth trying to keep pace with obligations to avoid issues arising in the future.

Our expert team are on hand to help you understand your MTD obligations and how they may change as your life circumstances do.

Get in touch to stay compliant with your new MTD obligations.