Making Tax Digital

MTD is the government’s initiative to get all taxpayers (individuals and businesses) a digital tax account, giving them the ability to submit tax returns online. The aim is to modernise and improve the UK tax system.

Once you’ve got used to the new way of doing things, going digital will mean:

• Greater efficiency
• Fewer errors in your data, as you and HMRC share the same data
• HMRC will be able to approve refunds that currently cause extra checks more quickly
• More free time

With the aid of cloud-based software, you will have convenient access to your data from anywhere. This software will also make it easier for your business to record and file your tax returns online.

MTD for businesses began on 1 April 2019 with VAT: you probably noticed the timetable further up this page. Other areas of MTD, such as income tax and corporation tax, have been subject to postponements.

If you have a VAT registered business with an annual turnover above the threshold of £85,000, you need to keep digital records and submit VAT returns using compatible software.

This involves setting up a digital tax account and filing your returns online using an accounting system or app that’s integrated with the new digital gateway that HMRC is building.

HMRC will also want online access to transaction details and VAT calculations. Paper records will no longer be sufficient.

You need to ensure that the software you currently use is MTD compatible. If you’re used to submitting VAT returns on spreadsheets, you will need ‘bridging software’ to bridge the gap between Excel and HMRC’s system.

If you already use appropriate software then this is a good start, but you may still need to upgrade your software so that it can connect to the new HMRC gateway. As MTD progresses you may also have to change the way you connect transactions that are recorded in a different software (e.g. supplementary calculations in Excel or sales systems).

Our MTD team would be happy to advise you on this: please use our enquiry form to get in touch.

If this is the case then you will need the following:

1. MTD compatible software
2. Your government gateway login details
3. Email address connected to your government gateway
4. Business type (e.g. Limited company)
5. Company Registration Number (as per Companies House)
6. UTR (10-digits)

Then visit the government’s website and complete the questions with the above information.

You will be asked to agree to receiving information by email and to confirm the email address. HMRC will then send you an email for verification and you must click on the link provided in that email.

This will then take you to the final sign up page asking you to confirm you want to join the pilot. Once you select to join the pilot it will take 72 hours for HMRC to confirm that you can take part in the trial. Once you receive that notification by email, you need to follow the instructions within your software.

We expect that the pilot will automatically switch to live.

There is likely to be a grace period for businesses to put in place their new systems, but after that there will be penalties for business that don’t comply with the MTD regulations.

If your VAT-registered businesses falls below the £85,000 annual turnover threshold, you did not need to be compliant until 2020 or later. We’d advise you to make sure you are as informed as possible. Our MTD team is available to help: please get in touch via our enquiry form.

As an individual taxpayer, you will need to use a personal tax account through HMRC. This will bring together all your details in one place: more convenient for you and more efficient for HMRC.

From 6 April 2026, MTD for Income Tax (also referred to as MTD for ITSA) will apply to businesses, self-employed individuals, and landlords with income over £50,000.

From 6 April 2027, MTD for Income Tax (also referred to as MTD for ITSA) will apply to businesses, self-employed individuals, and landlords with income over £30,000.

If this applies to you as a sole trader or landlord, you will need to send HMRC a quarterly summary of your business income and expenses using MTD-compatible software.

Following the four quarterly summaries, HMRC will also require an End Of Period Statement and a ‘final declaration’.

We have more details in this article.

In December 2022, the Government said that it ‘will now review the needs of smaller businesses, and particularly those under the £30,000 threshold. This will look in detail at whether and how the MTD for ITSA service can be shaped to meet the needs of smaller businesses and the best way for them to fulfil their income tax obligations.’

HMRC hasn’t announced when this will be extended to general partnerships or more complex partnerships (e.g. limited liability partnerships and those with corporate partners).

The following stage, MTD for Corporation Tax, also has no introduction date yet, but HMRC has said that it ‘will not [be mandated] before 2026’.

Frequently asked or not, we’d be happy to help answer it. You can contact a member of our MTD team as listed on this page, or you can use our enquiry form.