What’s Making Tax Digital?
Making Tax Digital (MTD) is the federal government’s plan to shift paper-based tax reporting on-line, spelling the top of form-filling for hundreds of thousands of UK companies.
Underneath MTD guidelines, all VAT-registered companies are already required to file quarterly VAT submissions and hold digital information utilizing MTD-compliant software program.
Subsequent in line for digitisation is revenue tax: from April 2026, people with a self-employed or property revenue over £50,000 per 12 months should use MTD-compatible software program to take care of correct and up-to-date digital information, and submit quarterly updates and an annual tax return to HMRC.
Why is tax going digital?
How a lot do you get pleasure from doing self-assessment tax returns? Not a lot, I wager. MTD is designed to make the tax system clearer and extra environment friendly for the UK small companies, in addition to to assist HM Income & Customs.
As soon as the essential info is saved digitally, you may entry it at any time when you might want to, so that you gained’t must spend every January trying by means of your small business transactions, receipts and invoices on your Authorities Gateway code as a result of it will likely be saved.
Underneath the brand new regime, a self-employed particular person should replace their information as soon as 1 / 4, as a substitute of every year. That is much less time to lose all of your receipts, which may’t be a nasty factor, however it additionally helps to color a clearer image of your private tax place.
5 steps for small companies Making Tax Digital
#1 – Discover out if your small business qualifies
All UK companies above the £90,000 VAT threshold have been inside the scope of MTD for VAT since April 2022.
MTD for Revenue Tax is being phased in in three phases:
- From 6 April 2026, in case you have a qualifying revenue of greater than £50,000 inside the 2024 to 2025 tax 12 months
- From 6 April 2027, in case you have a qualifying revenue of greater than £30,000 inside the 2025 to 2026 tax 12 months
- From 6 April 2028, in case you have a qualifying revenue of greater than £20,000 inside the 2026 to 2027 tax 12 months
#2 – Know your VAT deadlines
You must make notes of the dates when returns are due. In the event you miss them, you’ll begin to accumulate factors, and whenever you cross a sure threshold, you’re fined. For instance, the MTD for Revenue Tax deadlines for the following couple of years are:
- 31 January 2026: submission deadline for 2024 to 2025 Self Evaluation tax return
- 6 April 2026: begin date for holding information utilizing MTD for Revenue Tax software program for companies in scope
- 7 August 2026: first quarterly replace deadline
- 7 November 2026: second quarterly replace deadline
- 31 January 2027: Self Evaluation tax return deadline for the 2025 to 2026 tax 12 months
- 7 February 2027: third quarterly replace deadline
- 7 Could 2027: fourth quarterly replace deadline
The MTD for VAT deadlines don’t align precisely with the revenue tax ones, so be certain that to make an observation of these as properly.
#3- Discuss to your bookkeeper or accountant
They know essentially the most about your small business and can be capable of advise you about what’s greatest for it. They could additionally be capable of give recommendation for instance, on what software program can be greatest for you.
#4 – Subscribe to HMRC updates
HMRC usually sends out updates in regards to the progress of MTD, which can have an effect on you and your small business. Ensure you sustain with these updates to make sure you don’t miss any vital bulletins.
#5 – Select an MTD-compatible software program package deal
Listed here are 5 MTD-compatible accounting software program suppliers that make it simple to conform:
Sage Accounting
Sage makes it easy to remain compliant with Making Tax Digital due to its AI assistant, Sage Copilot. It retains your information correct, reminds you about deadlines, and helps you file on to HMRC. It additionally offers instruments for invoicing, expense monitoring, and Self Evaluation submissions.
Plans & Pricing: £18 to £59 monthly (excl. VAT)
Intro provide: 90% off for six months
Get began with Sage Accounting
Xero
Xero‘s all-in-one accounting platform is constructed for MTD — each plan helps Making Tax Digital for Revenue Tax and VAT. It routinely organises transactions into the best classes, provides you reside tax projections, and permits seamless digital submitting. You additionally profit from automated financial institution feeds, receipt seize, and detailed insights throughout all of your revenue sources.
Plans & Pricing: £18 to £65 monthly (excl. VAT)
Intro provide: 90% off for 3 months.
Get began with Xero
QuickBooks
QuickBooks streamlines each side of digital tax compliance, from recording transactions to submitting VAT and Self Evaluation returns. Totally recognised by HMRC for MTD, it provides you good automation, AI-powered revenue monitoring, and real-time visibility into your funds.
Plans & Pricing: £10 to £115 monthly (excl. VAT)
Intro provide: 90% off for 3 months
Get began with QuickBooks
Zoho Books
Zoho Books gives one of the cost-effective methods to adjust to MTD. You’ll be able to submit VAT and revenue tax on to HMRC, automate return creation, and match transactions in seconds. Even on the free tier, Zoho provides small companies important invoicing and expense instruments, whereas larger plans develop into reporting, automation, and analytics.
Plans & Pricing: £0 to £165 monthly (excl. VAT)
Get began with Zoho Books
FreeAgent
FreeAgent takes the stress out of MTD by permitting you to generate and file digital VAT returns and Self Assessments in just some clicks. You too can handle Company Tax and annual accounts from the identical place, with reside banking feeds and clear monetary insights.
Plans & Pricing: £9.50 to £16.50 monthly (excl. VAT)
30-day free trial included
Get began with FreeAgent
What if I don’t need to use particular accounting software program?
For these not able to take the leap to devoted accounting software program, Microsoft Excel spreadsheets coupled with bridging software program, corresponding to QuickBooks On-line, can present a easy, cost-effective and compliant method to submit VAT returns digitally to HMRC. Companies can produce a “9-Field” VAT return inside the Microsoft Excel spreadsheet and add this to the bridging software program, which connects to HMRC and submits the VAT digitally.
“This offers an easy and cost-effective answer to beat the challenges the digital swap poses for them,” says MHA oblique tax accomplice Alison Horner.
Can I be exempt from Making Tax Digital?
Exemption from MTD is out there however provided that a enterprise can present that it’s not cheap or sensible to make use of computer systems, software program, or the web to adjust to MTD guidelines. Most companies won’t qualify for an exemption although and should chunk the bullet between now and April 1, warns MHA.
Additional studying
A information to Making Tax Digital for VAT
