Making Tax Digital: What You Need to Know

Making Tax Digital (MTD) is one of the most significant changes to the UK tax system in decades. HMRC's goal is to move the entire tax reporting process online and in real-time, reducing errors and improving compliance. If you're a business owner, you need to understand what's coming and how it affects you.

What is Making Tax Digital?

MTD is a government initiative requiring businesses and individuals to keep digital records and submit tax information to HMRC using compatible software. It began with VAT and is now being extended to Income Tax.

Who does it affect?

**MTD for VAT** has been in place since April 2019 for all VAT-registered businesses. If you're VAT-registered and not already using compliant software, you're already behind — contact us immediately.

**MTD for Income Tax Self Assessment (MTD for ITSA)** will apply to sole traders and landlords with income above £50,000 from April 2026, and those with income above £30,000 from April 2027. Partnerships will follow at a date to be confirmed.

What does compliance require?

Under MTD for ITSA, you'll need to:

- Keep digital records of all business income and expenses - Submit quarterly updates to HMRC (rather than one annual return) - Submit a final declaration at year-end

This is a significant shift from the current once-a-year self-assessment model.

What software is compatible?

HMRC maintains a list of approved software. Most major cloud accounting platforms — including QuickBooks, Xero, FreeAgent, and Sage — are compliant. If you're still keeping records in spreadsheets, now is the time to move.

How we can help

We're already helping clients prepare for MTD. Whether it's migrating you to compliant software, setting up the right bookkeeping processes, or just making sure you understand what's expected — we handle it. [Get in touch](/contact) to start the conversation.