Maternity leave can be handled in a variety of different ways and this is especially true for sole traders and self-employed individuals.
Having such control over your business and workload means that it is not uncommon to scale up and down work alongside childcare arrangements, but this can also bring temporary pauses on income where necessary.
As Making Tax Digital (MTD) begins to take effect, it is worth considering what happens should your income dip below the threshold and whether this makes MTD preparations unnecessary.
What happens if you fall below the threshold for Making Tax Digital?
If you know that you will not be generating a qualifying income above £50,000 this year, you might be tempted to abandon MTD preparation and leave it for a future time.
However, your obligations may have already been decided based on your economic performance during the 2024/2025 tax year.
If you generated a qualifying income above £50,000 during this year, then it will still be necessary to prepare for MTD in 2026.
A drop in income does not remove you from the scope of MTD unless you stay below the threshold for three consecutive years.
Even this will become more challenging to do as 2027 will see the threshold fall to £30,000 and 2028 will see the threshold fall to £20,000.
The only way to immediately be out of the scope for MTD would be if you know that you will no longer be generating a qualifying income.
When you sell your rental properties, or you stop operating your business, you should let HMRC know so that you no longer have to keep pace with MTD obligations for an income that no longer exists.
How should I prepare for Making Tax Digital if I am on maternity leave?
Even if your income is currently nil, you will still be expected to get MTD ready.
This means you will need to set up your digital record-keeping and submit quarterly filings along with the annual statement.
Failure to do so will ultimately see you face penalties and fines, even if there was no tax to be paid during the period.
Keeping up with your MTD obligations may not be the highest priority if you are welcoming new life into the world, but it is not something you can afford to ignore.
Our team can help you to manage your obligations so that what should be a joyous time is not soured by HMRC taking issue with a lack of tax filings.
While MTD is due to take effect relatively soon, there is still time to get everything set up before the first deadline hits.
We can help you be ready for MTD regardless of what is happening in your personal life.
To make sure you are fully ready for MTD, speak to our team today.
