Does being on maternity leave make you exempt from Making Tax Digital?

Given that it is the biggest overhaul to the way that taxes are filed in decades, it is no wonder that Making Tax Digital (MTD) for Income Tax has a whole host of additional considerations to manage.

As the timing when people are pulled into scope for MTD is based on income, you might wonder what would happen if there was something that disrupted your income during this year.

Rules regarding maternity leave have now been clarified and this information can be extrapolated to consider other variations in your income this year.

As such, you should understand whether you are in the scope of MTD or not.

Will I still be pulled into MTD if I am on maternity leave?

Depending on when your maternity leave began, you may still be pulled into MTD even if you know that your income will be below the threshold this year.

The MTD obligations are 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.

In cases where maternity leave is impacting your income, the rules depend on whether your business is continuing either during or after the maternity leave – it is not uncommon for self-employed individuals to reduce hours rather than stop them entirely.

If your income is only temporarily reduced or paused, then the MTD obligations will still affect you.

In cases where your income falls below the threshold for three consecutive years, you can opt out of your MTD obligations – though it is worth checking that you have fallen below the threshold for the other stages of MTD obligation as well.

If you have stepped away entirely from your business or no longer have the rental income, then you should alert HMRC and your obligations will cease accordingly.

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

While it might seem like a lesser priority than embarking on a new chapter of life with a baby, your MTD obligations are still important.

If you are only facing a temporary reduction or pause in income, you need to manage your MTD preparation as though this were not the case.

This means setting up your systems to prepare for digital record-keeping so that you can submit your quarterly filings alongside your annual statement.

Fortunately, there are no penalties for missing deadlines this year, so if your focus does waver on account of tending to an infant, then you will not be punished for this lapse.

However, getting support from professional accountants can ensure that your obligations are met while you devote your energy to parenting.

We would not want to see anyone punished for not understanding or being aware of their MTD requirements, so let us help you to prepare for the changes before the deadlines start to hit.

Get in touch with our team to be fully prepared for MTD.