FEBRUARY 2026 – MONTHLY NEWSLETTER RECAP

ASESA Solutions Ltd- FEBRUARY 2026 - MONTHLY NEWSLETTER RECAP

February focused entirely on Making Tax Digital (MTD) and HMRC’s phased move towards fully digital tax reporting. Across our weekly updates, we explained what MTD is, how it currently applies to VAT, how it will expand to Income Tax from April 2026, and what compliance and penalties taxpayers need to be aware of. These updates are particularly relevant for VAT-registered businesses, self-employed individuals, and landlords preparing for upcoming changes.

1] What is Making Tax Digital (MTD)?

We introduced Making Tax Digital as HMRC’s initiative to modernise the UK tax system by improving accuracy, efficiency, and transparency. Key points covered:

• Taxpayers must keep digital records and submit information using MTD-compatible software

• MTD is already mandatory for VAT

• MTD will expand to Income Tax for self-employed individuals and landlords

• The aim is to reduce errors, improve record-keeping, and give taxpayers a clearer view of their tax position throughout the year.

  
  

2] MTD for VAT – Digital Record-Keeping in Practice

This update focused on ongoing obligations under MTD for VAT, which applies to all VAT-registered businesses. We highlighted that VAT returns must be submitted digitally using MTD-compatible software and that businesses must maintain accurate digital records. HMRC also requires digital links between systems, meaning manual copy-and-paste between spreadsheets and software is not compliant. Strong digital bookkeeping supports smoother VAT reporting and better financial visibility.

3] MTD for Income Tax – Who Must Sign Up and When

We explained HMRC’s phased rollout of MTD for Income Tax (MTD ITSA):

• Income over £50,000 (2024–25): mandatory from 6 April 2026

• Income over £30,000 (2025–26): mandatory from 6 April 2027

• Plans announced to reduce the threshold to £20,000 in future years

Taxpayers will need to submit quarterly updates, an End of Period Statement, and a Final Declaration, replacing the traditional annual-only Self Assessment process.

4] Compliance & Penalties Under MTD

The final update covered HMRC’s points-based penalty system under MTD. Late submissions result in penalty points rather than immediate fines, but repeated failures can trigger financial penalties. Interest and late payment penalties may also apply where tax remains unpaid. Consistent compliance is essential to avoid unnecessary charges.

Overall Summary

February’s updates emphasised the importance of early preparation for Making Tax Digital, particularly ahead of MTD for Income Tax from April 2026. Businesses, self-employed individuals, and landlords who invest in digital record-keeping now will be better placed to stay compliant, avoid penalties, and reduce year-end stress.