The UK tax system is moving towards full digitalisation, and Making Tax Digital (MTD) is at the centre of this shift. Designed to reduce errors and improve efficiency, MTD changes the way businesses, landlords, and self-employed individuals keep records and report to HMRC.
If you are VAT-registered, self-employed, or receive income from property, understanding MTD now will help you stay compliant and avoid last-minute stress.
What is Making Tax Digital?
Making Tax Digital is HMRC’s initiative to modernise the tax system by requiring taxpayers to:
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Keep digital records of income and expenses.
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Submit tax returns using HMRC-approved MTD-compatible software.
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Provide HMRC with quarterly digital updates rather than relying only on an annual return.
The aim is to reduce manual errors, improve accuracy, and give taxpayers a clearer view of their tax position throughout the year.
Who Needs to Comply with MTD?
Current rules:
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VAT-registered businesses with a taxable turnover above £85,000 must already follow MTD rules for VAT.
Upcoming deadlines:
- From April 2026 – Self-employed individuals and landlords with – turnover of more than (this is your total sales for the year not profit) – £50,000 must comply with MTD for Income Tax Self-Assessment (MTD for ITSA).
- From April 2027 – Self-employed individuals and landlords earning £30,000 to £50,000 will also join the scheme.
MTD for Corporation Tax is planned but not yet mandatory.
Why Prepare Now?
Acting early makes the transition much easier. Moving to MTD in advance of the deadlines means you can:
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Choose the right software and learn to use it effectively.
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Avoid compliance risks and potential penalties.
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Improve your financial visibility with real-time digital records.
How to Get Ready for MTD
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Select MTD-Compatible Software
Choose approved software such as Xero, QuickBooks or Sage. Your choice will depend on your reporting needs, business size and budget. -
Move to Digital Record Keeping
Paper-based records or standard spreadsheets will no longer be sufficient. Your income and expenses need to be recorded digitally and, where necessary, linked to bridging software. -
Understand New Reporting Requirements
MTD requires more frequent submissions, with quarterly updates replacing a single annual submission for ITSA. -
Consider Professional Support
An accountant can help select the right software, set up your systems, train you or your team, and manage ongoing submissions to ensure you remain compliant.
Benefits of Going Digital
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Reduced risk of costly errors and late submission penalties.
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More accurate financial information, helping you make informed business decisions.
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Time savings as automation reduces manual bookkeeping tasks.
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Better cash flow visibility and easier tax planning.
Common Questions About MTD
Can I still use spreadsheets?
Yes, but you will need to use bridging software to link your spreadsheets to HMRC’s systems.
What happens if I do not comply?
You may face penalties, late submission fines and interest charges.
Will MTD increase my workload?
Once set up, MTD generally saves time by reducing manual data entry and giving you a clearer picture of your tax position.
Can my accountant manage this for me?
Yes, we can set up your software, manage quarterly updates, and ensure all submissions meet HMRC requirements.
Get Ready for MTD Now
The move to Making Tax Digital is unavoidable, but with the right preparation, it can make tax management easier and more efficient. If you are unsure where to start, we can help you:
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Review your current record-keeping processes.
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Select and set up MTD-compatible software.
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Manage your ongoing submissions to ensure full compliance.
Contact us today to prepare for Making Tax Digital and avoid unnecessary stress when the new rules take effect.
