How to Make the Most of Making Tax Digital

Now that Making Tax Digital is here, Will Johnson from the PFM Dental Accountancy team is here to tell you why Making Tax Digital offers an opportunity for associate dentists.

When we draft the accounts for an associate dentist, we get the information in a variety of different ways. Some associates provide us with highly organised spreadsheets with detailed breakdowns of their business costs for the year, and others might send an email with a few expenses on it.

HMRC brought in Making Tax Digital from April 2026 for those with qualifying turnover of more than £50,000 in the 2024/25 tax year. This was in an aim to standardise the approach to collating information for tax returns and to create a digital link that could be traced for transactions.

For those who were VAT registered, they had been operating under this system since April 2019, however (the majority of) associate dentists are not registered for VAT, and this has been a big change to the way records are kept.

Whilst MTD has brought additional admin burden to associate dentists there are opportunities.

Claiming Expenses

We have seen that use of digital software has increased the expenses being claimed by associate dentists. For the aforementioned expenses on an email, regular bookkeeping has increased the awareness of business transactions and the expenses that can be claimed.

Whilst claiming expenses sounds obvious, it is always worth thinking about what can be claimed. An additional £100 of expenses for a higher rate taxpayer will save £42 in tax.

Tax Payments

We have seen an increase in clients getting their 2025/26 tax returns completed earlier this year. This is mainly due to clients getting their records up-to-date for the April 2026 MTD transition. This has meant we have been able to calculate the tax due for the year earlier and help give advice on the tax payments that are due.

We have the opportunity to lower payments on account if there has been a reduction in income for the following tax year. For July payments on account this usually comes with the early submission of the tax return, however for January’s payments, we look to calculate the income earnt so far in the tax year.

With Making Tax Digital for 2026/27, this will be a much simpler process to review the year-to-date figures, and the tax projections to see if lowering the January payment for the 2026/27 tax year is achievable.

Tax Planning

One of the busiest times we find for tax planning is February and March. This is because for any tax planning to be effective it must be done before the end of the tax year on 5th April.

The main tax planning strategy for associate dentists is to make private pension contributions to keep their taxable earnings below £100,000 and retain their personal allowance in full.

Making Tax Digital offers a quarterly look into how the current tax year is going. As accountants, we are often backward looking as when we come to complete tax returns we are looking at the information for the previous financial year. Making Tax Digital gives your accountant the opportunity to appraise the current tax year and offer suggestions to help minimise your tax bill.

The other issue we have found with tax planning in February and March is that it will come after you have made your January tax payment. This is normally the biggest tax payment of the year as student loan is paid in full alongside any catch up payments for the tax year that has just been.

This often leaves associate dentists in a hard position where they may want to make additional pension contributions but are limited by the cash they have available to put into the pension.

Having an understanding of your earnings on a quarterly basis can help you to plan and potentially put money into a pension during the year, rather than a large lump at the end to help with your cashflows.

Making Tax Digital allows you and your accountant to be closer to your numbers and help make decisions that will impact the current tax year. With retroactive tax planning, there can be a longer lag between the payment into the pension, or purchase of a new asset, and when you see the benefit of this tax relief.

Making Tax Digital – Future Plans

Whilst Making Tax Digital has come in from April 2026, for those with more than £50,000 of turnover, this threshold drops in subsequent years:

During this first year of Making Tax Digital HMRC are being very lenient with penalties for late submission and if there are errors on the quarterly returns.

HMRC want to make sure that all corrections are made before the final tax return is submitted for the 2026/27 tax year.

From April 2027 onwards, HMRC will become stricter with penalties for those who are consistent late filers.

HMRC ran a consultation over summer on ‘More timely payments of Income Tax Self Assessment. This looks to be a precursor to the government bringing in quarterly tax payments based on MTD submissions. This would be in an effort for the government to receive tax monies earlier and reduce the interest it pays on the country’s debt.

With this likely in the pipeline, it is worth getting comfortable with MTD as it may soon have an impact on the amount and timing of your tax payments. Here at PFM, we offer different levels of support for associate dentists ranging from those who want to complete their MTD reports themselves, to clients who need more support.

If you would like more help and support with your MTD filings or have any queries about how you could benefit from Making Tax Digital, please speak to your accountant.