Making Tax Digital (MTD)

Making Tax Digital is HMRCs initiative to modernise the UK Tax System requiring businesses and individuals to maintain digital records and make routine submissions to HMRC.

So what does this mean in practice?

This means that businesses and individuals will need to keep their financial records in an electronic format and use compatible software to make Returns to HMRC.

In practice, we recommend the use of a bookkeeping software such as Quickbooks or Xero to record and maintain your accounts through the year, from this software you can then make the quarterly MTD submissions to HMRC as required.

MTD has / is being introduced for VAT and Income Tax, MTD for VAT is already mandatory and MTD for Income Tax (ITSA) will be phased in from April 2026, as follows…

Making Tax Digital for VAT

MTD for VAT has been mandatory for all VAT registered business since April 2022.

To be compliant the following must be done…

• All accounting records must be kept electronically
• Data must be transferred to the VAT Return submission mechanism electronically and not re-keyed, cut or pasted
• VAT Returns must be submit electronically to HMRC

NB : VAT Returns can no longer be manually entered and submit via HMRC’s online VAT service.

Making Tax Digital for Income Tax (ITSA)

MTD for ITSA applies to individuals receiving income from Self-Employment (Sole Traders), Property (Landlords) or both.

The date from which MTD for ITSA must be adopted depends on the total annual qualifying income in the previous Tax Year.

• April 2026
  Mandatory for those with a total annual income of over £ 50,000
  Based on income received in the Tax Year 24/25
• April 2027
  Mandatory for those with a total annual income of over £ 30,000
  Based on income received in the Tax Year 25/26
• April 2028
  Mandatory for those with a total annual income of over £ 20,000
  Based on income received in the Tax Year 26/27

To be compliant the following must be done …

• All accounting records must be kept electronically
• MTD Returns must be submit electronically to HMRC on a quarterly basis

Making Tax Digital for Partnerships

MTD for Partnerships will be required to adopt MTD in future years, the timeline for this has yet to be confirmed by HMRC.

Making Tax Digital for Corporation Tax

HMRC does not intended to introduce MTD for Corporation Tax, but does intend to develop a new method for “administrating Corporation Tax” in the future.

Bookkeeping Service

Our Bookkeeping Service is fully MTD compliant, supporting business owners and individuals to meet their MTD obligations.

Regardless of when a business or individual must adopt MTD, keeping your bookkeeping records electronically (ie using software) not only organises your finances and improves accuracy, but also gives you the ability to produce meaningful reports based on your financials, which can help you to better understand and manage your finances.

Find out more about our Bookkeeping service