What Is Making Tax Digital (MTD)?
What Is Making Tax Digital (MTD)?
Making Tax Digital (MTD) is a government initiative from HMRC designed to modernise the UK tax system. Its goal is to make tax administration more effective, efficient, and easier for taxpayers by moving away from paper-based processes and encouraging digital record-keeping and reporting.
What Does MTD Mean for You?
Under MTD, individuals and businesses must use HMRC-compliant digital software to:
Keep and maintain digital records
Submit tax returns and updates directly to HMRC through their software
This initiative affects a range of taxes including VAT, Income Tax, and eventually Corporation Tax.
Who Is Affected by MTD?
As of 2025, MTD affects:
1. VAT-registered businesses
All VAT-registered businesses must follow MTD rules, regardless of turnover.
This means keeping VAT records digitally and submitting VAT returns using MTD-compatible software.
2. Self-employed individuals and landlords
MTD for Income Tax (MTD ITSA) will apply from April 2026 for individuals with income over £50,000, and from April 2027 for those earning over £30,000.
3. Companies (MTD for Corporation Tax)
MTD for Corporation Tax is expected to be introduced no earlier than April 2026, although exact timelines are still under consultation.
What Software Is Required?
To comply with MTD, you must use compatible accounting software that can:
Record transactions digitally
Connect to HMRC’s systems
Submit returns directly through an API
Examples include Xero, QuickBooks, Sage, and FreeAgent. Spreadsheets may still be used if they are integrated with bridging software.
Benefits of MTD
Fewer errors from manual data entry
Real-time updates on your tax position
Better financial planning from up-to-date records
Streamlined processes for filing tax returns
Key Deadlines and Updates
MTD for VAT: Already mandatory for all VAT-registered businesses.
MTD for Income Tax: Starts in April 2026 for those earning over £50,000.
MTD for Corporation Tax: Still in consultation but likely to follow after 2026.
How Barnett & Co Accountants Can Help
At Barnett & Co Accountants, we help businesses and individuals transition smoothly to MTD compliance. Whether you need help choosing the right software, setting up digital records, or submitting returns, we offer tailored support to keep you compliant and stress-free.
Need help with Making Tax Digital?
📞 Call us on 0345 646 1516
📧 Email: info@barnettandco.uk
📍 Electra House, Electra Way, Crewe, CW1 6GL
Let us take the hassle out of tax.
