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What is Making Tax Digital (MTD) and Why Does It Matter?

If you’re running a business in the UK, whether you’re a sole trader, a landlord, or a limited company, you might have heard the term Making Tax Digital (MTD) floating around. But what exactly is it, who needs to worry about it, and why is it such a big deal?


Let’s break it down in plain English.


What is Making Tax Digital?


Making Tax Digital (MTD) is a UK government initiative designed to make the tax system more efficient, effective, and easier for taxpayers to get it right. In short, it’s about moving away from paper records and manual processes and bringing everything online.


The idea is to help businesses keep on top of their finances by using digital accounting software to record income and expenses, and then submit tax returns directly to HMRC through those systems.


Gone are the days of last-minute panic and digging through paper receipts; MTD is about real-time, accurate, digital record-keeping.


Who Does MTD Affect?


Right now (2025), MTD applies to:


VAT-registered businesses


  • If your business is registered for VAT and earns £90,000 or more a year, you must keep digital records and file VAT returns using MTD-compatible software.

  • From April 2022, even voluntarily VAT-registered businesses (those under the £90k threshold) were required to follow MTD rules for VAT.


Landlords and Self-employed Individuals


  • MTD for Income Tax (also known as MTD for ITSA – Income Tax Self-Assessment) is on its way.

  • It will apply to sole traders and landlords with an annual income of more than £50,000 starting from April 2026.

  • Those earning over £30,000 will be brought in from April 2027.


Limited Companies


  • MTD for Corporation Tax is still in the works, but there’s no confirmed start date yet.


Key Deadlines to Remember


Here’s a quick timeline to help you keep track:


April 2019 – MTD for VAT starts for VAT-registered businesses over the £90k threshold

April 2022 – MTD for VAT expands to all VAT-registered businesses, regardless of turnover

April 2026 – MTD for Income Tax begins for self-employed individuals and landlords earning over £50k

April 2027 – MTD for Income Tax expands to those earning over £30k

April 2028 – MTD for Income Tax expands to those earning over £20k

 TBC – MTD for Corporation Tax (no set date yet)


Why Does MTD Matter?

Let’s be honest: tax can be a headache. But MTD is designed to make things simpler and less stressful in the long run.


Here’s why it matters:


  • Fewer mistakes – Digital software reduces errors that can happen with manual entry

  • Better organisation – No more shoeboxes full of receipts

  • Real-time tax info – Know what you owe and when, with fewer surprises

  • Saves time – Automating tasks like calculations and submissions makes your life easier

  • Future-proofing your business – As the tax system continues to modernise, keeping up with MTD helps you stay compliant


MTD isn’t just another bit of red tape, it’s a shift in how businesses handle their taxes. Whether you’re already in the MTD zone or gearing up for it in the next couple of years, now’s the time to get comfortable with digital record-keeping.


Want to stay ahead of MTD changes?

Sign up for our free Making Tax Digital Newsletter for the latest updates, helpful tips, deadline reminders, and jargon-free advice straight to your inbox. No fluff, just what you need to stay compliant and in control.


 
 
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