Women who are on maternity leave may still be required to submit quarterly updates under Making Tax Digital for Income Tax, even where they have no earnings during that period, provided they fall within the initial £50,000 MTD cohort.
HMRC has clarified how the MTD for Income Tax rules apply to individuals on maternity leave who meet the £50,000 qualifying income threshold. Mandatory participation begins from 6 April 2026, based on qualifying income earned in the 2024/25 tax year.
During a recent Business & Accountancy Daily webinar on MTD, questions were raised about the position of taxpayers who are brought into MTD in the first wave and then subsequently take maternity leave. In particular, clarification was sought on whether quarterly submissions are still required where income drops to nil, and whether any form of maternity exemption applies.
HMRC has confirmed that eligibility for MTD is determined by qualifying income, defined as total gross income from self-employment and property, exceeding £50,000 in the 2024/25 tax year.
Where a taxpayer is already within MTD and then goes on maternity leave, their ongoing obligations depend on the status of their business. If the business continues to operate, or is only temporarily paused as a result of maternity leave, the individual must continue to comply with MTD requirements, including quarterly reporting.
An individual may opt out of MTD if their qualifying income falls below the relevant threshold for three consecutive tax years. However, this would not apply simply because income is nil during a period of maternity leave.
If the business ceases permanently, the taxpayer must notify HMRC via their online services account. In those circumstances, MTD obligations would come to an end.
