What Making Tax Digital means for sole traders and limited companies, the deadlines that matter, and how to get your records ready without the stress.
Making Tax Digital (MTD) is HMRC's long-running programme to move tax record-keeping and reporting online. The idea is simple: instead of pulling figures together once a year, businesses keep digital records and send regular updates to HMRC using compatible software. The result, in theory, is fewer errors, less last-minute panic, and a clearer view of what you owe as the year goes on.
If you run a small business or work for yourself, the practical question is straightforward: what do you actually need to do, and by when? This guide breaks it down without the jargon.
What Making Tax Digital actually requires
- Keep digital records of your income and expenses, rather than relying on paper or a spreadsheet you only update once a year.
- Use HMRC-compatible software to store those records and submit your information.
- Send updates to HMRC during the year, not just a single annual return.
- Maintain a clear digital link between your records and the figures you submit, so data is not re-keyed by hand.
Who it applies to, and when
MTD for VAT already applies to all VAT-registered businesses, regardless of turnover. The next major phase is MTD for Income Tax Self Assessment, which affects sole traders and landlords and is being introduced in stages based on income. Those with the highest qualifying income are brought in first, with lower thresholds following in later phases.
Limited companies are not yet inside MTD for Income Tax, but MTD for Corporation Tax is expected to follow in the years ahead. The direction of travel is clear: over time, digital record-keeping will be the norm for almost every business.
How to get ready
- Check whether you are affected and confirm the date your business is required to join.
- Move away from paper and ad-hoc spreadsheets towards proper bookkeeping software that is MTD-compatible.
- Get into the habit of recording income and expenses as they happen, rather than in a year-end rush.
- Keep your business and personal finances separate so your digital records stay clean and easy to report.
- Speak to your accountant early so the software and processes are in place well before your first deadline.
How we can help
At LN Accountants we set clients up on compatible software, handle the digital submissions, and make sure your records are accurate throughout the year. If you are unsure whether MTD applies to you yet, or you simply want the change handled for you, get in touch and we will take care of it.
