Making Tax Digital is a UK government initiative designed to modernise and simplify tax filing by requiring businesses and individuals to keep digital tax records and submit returns electronically using HMRC-approved software.
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.
Making Tax Digital for VAT – What You Need to Know
✔ 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.
Making Tax Digital for Income Tax (ITSA) – Step-by-Step Guide
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.
- Register via HMRC – Sign up through the Making Tax Digital portal.
- Start keeping digital records – Ensure all income and expenses are logged digitally.
- Submit returns via MTD software – File tax returns on time.
Common Mistakes to Avoid When Transitioning to Making Tax Digital
❌ Waiting until the last minute – Start early to avoid compliance issues.
❌ Using non-MTD software – Ensure your accounting tool is HMRC-recognised.
❌ Not keeping accurate digital records – Incomplete records may lead to penalties.
❌ Missing quarterly submission deadlines – Late filings could result in fines.
Benefits of Making Tax Digital
✔ Fewer errors – Digital tax returns reduce miscalculations.
✔ Time-saving – Automated processes simplify tax filing.
✔ Improved accuracy – Avoid costly tax misreporting.
✔ Better financial control – Real-time tracking helps with cash flow management.
Frequently Asked Questions About Making Tax Digital
- What Happens 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. - Is Making Tax Digital Mandatory for Everyone?
Yes, if your business meets the MTD income threshold. - Do Sole Traders Need to Register for MTD?
Yes, if you earn over £50,000 (from 2026) or £30,000 (from 2027).
How Can I Get Help?
At TaxRelax, we specialise in helping businesses and individuals transition to MTD smoothly. 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.
Need help?
