Making Tax Digital (MTD)

Introduction to Making Tax Digital

If you run a VAT-registered business in the UK, you’ve probably heard about Making Tax Digital (MTD). It’s not just another bit of red tape — it’s a major shift in how businesses handle their taxes.

MTD is HMRC’s push to modernise the tax system. Instead of paper records or clunky spreadsheets, businesses now need to keep digital records and use approved software to submit VAT returns. The idea is to reduce errors, save time, and make life easier for everyone.

Originally, MTD only applied to businesses earning above the VAT threshold. But as of April 2022, it’s been extended to all VAT-registered businesses, no matter how big or small. So if you haven’t made the switch yet, now’s the time.

Here’s what you need to do:

• Keep your VAT records digitally (no more handwritten ledgers!)

• Use MTD-compatible software

• Submit your VAT returns through that software, not the old HMRC portal

It might sound daunting, but there are real benefits. You’ll spend less time chasing paperwork, make fewer mistakes, and get a clearer picture of your finances. Plus, HMRC has published guidance to help you figure out when to submit your first return under MTD.

Looking ahead, MTD will also cover Income Tax Self Assessment from April 2026, starting with self-employed people and landlords earning over £50,000 HMRC Sep25 update .

Challenges and Considerations for Businesses

Despite the advantages, the transition to Making Tax Digital poses certain challenges for businesses, particularly small and medium-sized enterprises (SMEs). One crucial consideration is the need for updated software and technology that align with HMRC's requirements. Investment in digital tools can prove costly; hence, businesses need to evaluate their existing systems and prepare for a potential upgrade.

Moreover, the adjustment period for many taxpayers may require time and training to effectively manage their digital tax submissions. Thus, businesses should proactively seek resources and support to ensure compliance with MTD guidelines. Notably, HMRC provides guidance and resources to aid businesses in this transition.

At QABC, we make Making Tax Digital (MTD) easy to understand and even easier to implement. Whether you're a sole trader, landlord, or small business owner, we’ll make sure you’re not just compliant — but confident.