What is
Making Tax Digital (MTD) is the name for HM Revenue and Customs’ (HMRC) project to transition all businesses and individual taxpayers away from paper / manual records and onto digital platforms. Most VAT registered businesses have been complying with MTD for some time now.
This means their records of income and expenditure are maintained on MTD compliant accounting software and their VAT returns are filed with HMRC through the software. All sales and purchase invoices must be stored electronically within the accounting software which makes it much easier for HMRC to perform compliance checks (either at the business premises or remotely).
What is next for
Making Tax Digital?
On 6 April 2026, MTD is being rolled out to the self employed (sole traders) and landlords with income (sales / rent received, not profit) of £50,001 or above. Individuals with both self employed and rental income above £50,001 in total will need to comply. Any such individuals need to acquire Making Tax Digital Income Tax Self Assessment (MTD for ITSA) compliant software before this date and register for MTD ITSA with HMRC through the software.
Quarterly submissions of income and expenses (along with a final declaration) will need to be made to HMRC via the software rather than the current annual submission on a self assessment tax return.
Those with a combined income of over £30,000 will need to comply from 6 April 2027.
Frequently asked questions
Partnerships will need to comply with MTD for ITSA from a date yet to be confirmed.
Yes, this will definitely happen although it’s unlikely to be before 6 April 2027. HMRC is still consulting with the various accounting representatives and industry bodies as to exact timings and requirements for MTD for CT.
There are currently no plans to change the dates of payments for Income Tax (31 January and 31 July) or Corporation Tax ( annually for SMEs) although a change to quarterly payments with an adjustment at the end of the year should not be ruled out as this would help the treasury’s cash flow and reduce bad debts albeit to the detriment of the cash flow of small businesses.
If you’re not currently using accounting software to record your business transactions then it may be sensible to start doing this from 6 April 25 (or even better 6 April 24) rather than leaving it until the last minute. Whilst this doesn’t mean you will need to file quarterly information with HMRC it does give you a year (or 2) to become fully conversant with digital record keeping and for your accountant to highlight anything you are doing wrong.
If you’re using software that is MTD VAT compliant it is highly likely that it will be adapted to be MTD for ITSA compliant too although you ought to check with your software company or accountant. If you’re unsure whether the software is MTD VAT compliant you can find out here: compatible software
How can 360 help?
As ‘accountants for the digital age’ we helped hundreds of businesses of all sizes successfully transition to Making Tax Digital for VAT and we can do the same for you as you move over to MTD for ITSA. We can:
Please get in touch on 01482 427360 or help@360accountants.co.uk for further information.