Totality Bookkeeping & Payroll Services

Making Tax Digital – Is your business prepared?

Making Tax Digital UK

What is Making Tax Digital?

The UK government has been working on digitalising tax for some time now. Making Tax Digital (MTD) for VAT is already implemented and being used by businesses to ensure that their VAT returns are completed and submitted, using appropriate software. The next phase will be to replace Self Assessment for sole traders and landlords, requiring all record keeping to become digital, using compatible software with HMRC systems.

Which businesses will be affected?

The eventual aim is for all tax affairs to be digitalised for every business. However, the next milestone on the journey is currently set, as follows:

  • Self-employed businesses and landlords with an income greater than £50,000 will be required to comply with MTD from April 2026
  • Self-employed businesses and landlords with an income greater than £30,000 will be required to comply with MTD from April 2027

What will be involved in MTD?

If your business falls under the above categories, the requirements to comply with MTD are:

  • Use software that is compatible with Making Tax Digital for Income Tax Self Assessment (ITSA)
  • Keep digital records of all business transactions using the above software
  • Provide quarterly reports to HMRC detailing the transactions made
  • Provide details of accounting/tax adjustments and any other sources of income
  • Make a final declaration by 31st January to confirm all the information is correct

What are the next steps for my business?

HMRC are currently undertaking pilot testing for eligible business and inviting voluntary sign ups through various software providers.

The first step for all businesses which will fall into the category for MTD in 2026 is to start using software to keep records of business transactions. There are many software providers out there but it is important to choose one which is compatible with MTD ITSA.

HMRC have provided a list of compatible software with choices for all budgets on their website

Ask advice from your accountant about the most suitable software for your business, as they will have preferences over which they use. You may also want to consider using the services of a bookkeeper who will be able to record all your transactions accurately to ensure that your tax affairs meet the HMRC criteria for the future.

We have limited spaces to take on new clients so if you need help with digitalising your business transactions, please drop us an email and we’ll get back to you as soon as we can.