Making Tax Digital: The Lowdown

One year to go: HMRC’s Making Tax Digital is looming, starting with VAT. Read our lowdown to get started.

What?

It’ll soon become mandatory for some sole traders and landlords to keep records of income and expenses digitally and submit quarterly returns through accounting software.

Who?

MTD for Income Tax will apply to UK sole traders and landlords with qualifying income exceeding the relevant threshold.

When?

Your MTD join date will depend on your qualifying income as follows:

April 2026 if £50k in 2024/25     
April 2027 if £30k in 2025/26     
April 2027 if £20k in 2026/27

Why?

BIG CHANGES: To help more than 2 million businesses reduce errors and save time with their tax affairs.

Although this change to UK Income Tax management will mean many businesses and landlords are faced with a hefty challenge over the next few years, the long-term benefits will be invaluable to businesses and HMRC.

• There will be less leeway for human error, inaccuracies and fraudulent activity.

• Your quarterly return will be filled out automatically with digital accounting software, saving you time and making it easier to meet deadlines. The workings behind the entries will not be submitted to HMRC.

• There is the opportunity to re-evaluate your business processes to streamline them and improve the management information available to you to assist in running your business and for tax planning.

What do I need to do?

The steps you will need to make from here on are dependent on your current method of record keeping:

• I already use accounting software
  Good news, you’re a step closer to being MTD compliant. You just need to check that the software you’re using is MTD compatible, and if not, make sure it is suitably upgraded.

• I record my income & expenditure using spreadsheets
  You can still record your income and expenses using spreadsheets. However, you will need an API (application programme interface) or bridging software which can automatically supply HMRC with your return figures. Alternatively, you may decide to convert to an accounting software for both recording and submitting information, which is currently our recommended route.

• I use paper records for VAT
  All records will need to be kept digitally and returns filed using HMRC compatible software. We can help you decide on the route best suited to your business and guide you along your digitisation process.

The next steps for your MTD journey

We’ll guide you along every step towards Making Tax Digital compliancy.

• Now
  Get in touch with us, so we can figure out the best course of action for you.

• The Coming Months
  Together, we’ll efficiently integrate MTD compliant software into your business. 

• April 2026
  You’ll be ready for the HMRC mandate for digital management.