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What Is Making Tax Digital (MTD) and Who Needs to Comply in 2025?
Making Tax Digital (MTD) is a UK government initiative that requires businesses and landlords to keep digital financial records and submit tax returns using approved software. Designed to improve accuracy and reduce paperwork, MTD is being rolled out in phases, with new income tax rules coming into effect from April 2026.
This move aims to reduce errors, improve accuracy, and make tax reporting more efficient.
Who Does Making Tax Digital Affect?
✔ VAT-registered businesses (mandatory from April 2022).
✔ Self-employed individuals & landlords earning over £50,000 (April 2026) and £30,000 (April 2027).
✔ Businesses subject to Corporation Tax (expected rollout in 2027).
Making Tax Digital Deadlines – When Do You Need to Comply?
- MTD for VAT – Already mandatory for all VAT registered businesses.
- MTD for Income Tax (ITSA) – April 2026 (for self-employed & landlords over £50,000).
- MTD for Corporation Tax – Expected from 2027.
Who Must Use MTD for VAT and What Are the Requirements?
✔ All VAT-registered businesses must keep digital records and use MTD-compatible software.
✔ Returns must be submitted electronically via HMRC-approved platforms.
✔ Manual VAT return submissions are no longer allowed.
How Do Self-Employed Workers comply with MTD for Income Tax
From April 2026, self-employed individuals and landlords earning over £50,000 must:
✔ Keep digital records of income and expenses.
✔ Submit quarterly tax updates via MTD-compatible software.
✔ File an End of Period Statement (EOPS) annually.
Making Tax Digital for Corporation Tax
The MTD Corporation Tax framework is expected to launch in 2027, requiring businesses to:
✔ Maintain digital financial records.
✔ Submit corporation tax returns electronically.
Making Tax Digital Software – Which One Should You Use?
To comply, you must use HMRC approved accounting software, such as:
✔ Xero
✔ QuickBooks
✔ Sage
✔ FreeAgent
These tools help with automated tax calculations, digital record keeping, and direct HMRC submissions.
How to Sign Up for Making Tax Digital with HMRC
To register for MTD for VAT or ITSA, follow these steps:
- Check eligibility. Confirm whether your business must comply with MTD.
- Select an MTD compatible software. Choose a recognised accounting tool or let us at Tax Relax assist you choose one.
- Sign up through the Making Tax Digital portal by registering via HMRC
- Start keeping digital records to ensure all income and expenses are logged digitally.
- Submit returns via MTD software so that tax returns are filed on time.
What Are the Common Mistakes People Make with MTD
Many businesses struggle with Making Tax Digital because they leave preparation too late. Waiting until the last minute often leads to compliance issues and unnecessary stress.
Another frequent mistake is using software that is not HMRC recognised for MTD submissions, which can cause errors or rejected filings. Accurate digital record keeping is also vital; incomplete or inconsistent data may lead to penalties or delays.
Finally, missing quarterly submission deadlines remains one of the most common errors, as late filings can result in fines and damage to your business’s compliance record. Starting early and using the right tools can make MTD simpler and more reliable.
Contact the team here at Tax Relax to help get your MTD in place.
Benefits of Making Tax Digital
- You get fewer error with Digital tax returns due to reduce miscalculations.
- Automated processes simplify tax filing saving you time
- Avoid costly tax misreporting which means it is improved accuracy.
- Real time tracking helps with cash flow management and better financial control
Frequently Asked Questions about Making Tax Digital
What is Making Tax Digital (MTD)?
Making Tax Digital (MTD) is a government initiative that requires businesses and individuals to keep digital records and submit their tax returns using HMRC recognised software. The aim of MTD is to make tax administration more efficient, reduce errors, and ensure all submissions are accurate and timely.
What If I Don't Comply?
HMRC has introduced a points-based penalty system for non-compliance. Missed deadlines accumulate points, and repeated non-compliance leads to fines.
Can I Still File Paper Tax Returns?
No, MTD eliminates paper based returns. All submissions must be digital.
MTD? Is Making Tax Digital Mandatory for Everyone.
Yes, if your business meets the income threshold.
Do Sole Traders Need To Register for MTD?
Yes, if you earn over £50,000 (from 2026) or £30,000 (from 2027).
Find out more about how small businesses like, Etsy and Airbnb sellers need to pay attention to tax.
And, if you’re still deciding who to trust, check out our guide on what to look for in a small business accountant.
How Can I Get Help With Making Tax Digital?
We specialise in helping businesses and individuals transition to MTD smoothly at Tax Relax. Contact us for expert guidance on MTD compliance, software setup, and tax efficiency.
With Making Tax Digital deadlines approaching, businesses and self-employed professionals must prepare now. Choosing the right software, keeping accurate digital records, and submitting returns on time will ensure compliance and make tax management stress free.
Key Takeaways on Making Tax Digital
Phased Rollout: MTD is already mandatory for all VAT registered businesses. It will extend to self-employed individuals and landlords with income over £50,000 from April 2026, and those over £30,000 from April 2027.
Core Requirements: You must keep digital financial records, use HMRC approved software for submissions, and file returns electronically. For income tax, this includes quarterly updates and an annual statement.
Getting Started: Your first steps are to confirm your eligibility, select a compatible accounting tool, and register for the service through HMRC’s online portal.
Benefits of Compliance: Adopting the new system helps reduce calculation errors, saves time through automation, and provides a clearer, real time view of your business finances.
About TaxRelax
With decades of combined experience supporting UK businesses and sole traders, our team at TaxRelax provides tailored guidance on digital compliance, VAT, and income tax. We’re here to help you understand and meet HMRC’s Making Tax Digital requirements with confidence.
Not sure if MTD applies to you? Our team can walk you through your specific obligations and help you choose the right software.
Last updated: October 2025 to reflect the latest HMRC guidance.