Implications of Making Tax Digital (MTD)

24 March 2025

If you’re not digital yet, Making Tax Digital (MTD) will have several implications for you, depending on your business type and income. Here’s what you need to know.

You’ll Need MTD-Compliant Software

• HMRC requires businesses to keep digital records and submit returns via compatible software (like QuickBooks, Xero, or FreeAgent).
• Spreadsheets alone won’t be enough unless linked with bridging software.

Paper Records Will No Longer Be Allowed

If you currently use paper-based accounting, you’ll need to switch to a digital system to comply.

This means scanning receipts, using apps for invoicing, and maintaining an organized digital ledger.

Deadlines and Phases of MTD

• VAT: If your business turnover is above £90,000, you should already be MTD-compliant. If you’re below this, you need to comply for VAT from April 2026.
• Income Tax Self-Assessment (MTD for ITSA): If you’re self-employed or a landlord earning over £50,000, you must comply from April 2026 (£30,000+ follows in 2027).
• Corporation Tax: No set date yet, but it will eventually apply.

More Frequent Reporting

• MTD for ITSA requires quarterly updates instead of just an annual return.
• This means you’ll need to log income and expenses regularly instead of doing everything last minute.

Initial Setup Costs and Learning Curve

• Switching to digital accounting involve costs for software and possible training.
• We can help get you set up on Xero or Quickbooks.
• However, long-term benefits include easier bookkeeping, fewer errors, and better tax planning.