Making Tax Digital — What It Means for Your Business
Making Tax Digital (MTD) is HMRC’s programme to move the UK tax system onto a fully digital footing. It requires businesses and individuals to keep digital records and submit tax information to HMRC through compatible software, rather than through paper returns or manual processes.
MTD has been introduced in stages over a number of years, and further phases are still being rolled out. If you are unsure whether MTD currently applies to you, or when it will, this page sets out the key information.
MTD for VAT
MTD for VAT has applied to all VAT-registered businesses since April 2022, regardless of turnover. If your business is VAT registered, you are already required to keep digital VAT records and submit returns through MTD-compatible software. Businesses that have not yet made this transition should do so as soon as possible to avoid HMRC penalties
Compliance Status
If you are unsure whether your current setup is fully MTD-compliant, we are happy to review the position.
MTD for Income Tax Self Assessment (MTD for ITSA)
MTD for Income Tax Self Assessment is the next significant phase, and it represents the most substantial change to personal tax reporting since Self Assessment was introduced. Under MTD for ITSA, self-employed individuals and landlords will be required to keep digital records and submit quarterly updates to HMRC, with a final end-of-year declaration replacing the current annual Self Assessment tax return.
Who Is Affected and When
The current timetable, subject to any further HMRC announcements, is as follows:
Income from both self-employment and property is combined when applying these thresholds. If you are close to any of these figures, it is worth starting to think about your position now rather than waiting until the deadline arrives.
IMPLEMENTATION TIMETABLE
2026
From April 2026
self-employed individuals and landlords with total gross income above £50,000
2027
From April 2027
those with total gross income above £30,000
2028
From April 2028
those with total gross income above £20,000
What MTD for ITSA Requires
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Digital Record Keeping
HMRC-compatible software throughout the tax year
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Quarterly submissions
HMRC summarizing income and expenditure
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Final Declaration
at year-end to confirm the overall tax position
The quarterly submissions are not tax returns as such — they are updates of income and expenditure figures. The final calculation of tax still happens at year-end. However, the requirement to keep on top of records throughout the year is a significant change for many people who currently manage their affairs annually.
Is Incorporating Worth Considering?
For some individuals affected by MTD for ITSA, it is worth taking the opportunity to review the overall structure of the business. In certain circumstances, operating through a limited company rather than as a sole trader or partnership may be more tax-efficient — and a limited company is not subject to MTD for ITSA in the same way, as corporation tax operates under a different framework.
Whether incorporation makes sense depends on a range of factors, including the level of profit, how income is drawn from the business, personal circumstances, and longer-term plans. MTD for ITSA can be a useful prompt to review the position properly. We can work through the numbers with you and give you an honest assessment of whether a change in structure would be worthwhile.
How We Can Help
We assist clients at every stage of the MTD process — from initial assessment through to ongoing quarterly submissions.
ASSESSMENT
Confirming whether and when MTD for ITSA applies to your situation
SOFTWARE
Recommending and setting up compatible software
HABITS
Helping you establish good digital record-keeping habits ahead of the deadline
MANAGEMENT
Managing quarterly submissions and the year-end finalisation on your behalf
REVIEW
Reviewing whether your current business structure remains appropriate in light of MTD
Ready for the Digital Shift?
MTD for ITSA is coming regardless, and the businesses that prepare early will find the transition considerably smoother than those that leave it until the last moment. If you would like to understand your position and what you need to do, we are happy to have an initial conversation at no charge.
Thinking of Switching Accountants?
We offer a free initial consultation to all new clients. It is an opportunity to have a straightforward conversation about your business and find out whether we are the right fit — there is no obligation whatsoever.
