Quarterly updates of your income and expenses are what will be required under Making Tax Digital. The rules as drafted at the moment show a clear intention that HMRC want a two way connection to your records. What does that mean? Well, in theory, HMRC want to be able to query the connection you will need to have, via MTD approved software, to check in on things.
This terrifies some people. Even those with nothing to hide at all probably don’t want HMRC to “see” all of your banking data. MTD will be enforced by law with heavy fines for those that don’t comply so you may as well accept that HMRC will have access to your information in due course.
What to do then? Well there is a bit of advice that has always been worth bearing in mind that actually helps here. I’ve always told people to have a separate bank account for rental income and a separate bank account for trades. During an enquiry HMRC can only ask to see things that are relevant to their enquiries. If you have all transactions in a standalone bank account that is not used for anything else any request to see bank statements will likely stop there. They won’t get your hands on your personal current account or savings accounts without a very good reason.
Same goes with MTD. All of the software I have seen at the moment allows access to multiple bank accounts. This is needed if you have relevant transactions that happen in multiple different accounts. So the simple fix to avoid HMRC seeing more than you want is to have standalone accounts! That way you only need to connect the relevant bank account to the software and anything else you have going on will be completely detached!
So, even if you aren’t ready to jump on board with all of the advantages of software for MTD just yet you should as a minimum start doing your banking housekeeping for when you are ready.