Making Tax Digital

Making Tax Digital (MTD) is an HMRC initiative that makes it compulsory for businesses and individuals to use digital systems for tax.

Understanding Making Tax Digital (MTD) is crucial for a wide range of individuals, from self employed persons and influencers to small business owners and landlords. When it comes to deadlines, obligations, and any other support you require, expert accountants like Brearley & Co are on hand to help.

Several laptops and phones on a busy desk

What is Making Tax Digital?

Making Tax Digital (MTD) is an HMRC initiative that makes it compulsory for businesses and individuals to use digital systems for tax. This includes keeping tax records, submitting tax data, and making payments.

What are the benefits?

The idea behind MTD is to make tax processes more streamlined and effective by automating calculations, submissions, and more. There are several benefits of MTD, including:

Provides a clearer, real-time view of tax records to allow for simpler tracking of tax liabilities and payments
Reduces administrative burden on businesses and individuals
Makes it easier to identify errors and discrepancies, minimising the risk of fines
Improves data safety through things like two factor authentication (2FA) and encryption

What are the challenges?

There are, however, a few challenges that come with MTD and making the switch to digital systems and software. These include:

The cost to invest in new technology and software required to stay compliant
The adaptation to new digital processes, which can be tricky
The need for a reliable internet connection

Two people working at laptops and making notes

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax refers to the next phase in HMRC’s initiative, which focuses on those with incomes from self employment or property rental.

What is changing?

If you have an income of over £50,000 annually, from self employment or property rental, you’ll be required to use MTD-approved software to:

Record all income and expenses
Submit quarterly income and expense summaries to HMRC
Finalise your end-of-year tax return (instead of the traditional Self Assessment tax return)

When will this be mandatory?

Making Tax Digital for Income Tax will become mandatory in phases, though you may be able to sign up early to test the service.

From 6th April 2026: Mandatory for those with total qualifying income over £50,000 (based on their 2024-25 tax return)
From 6th April 2027: Mandatory for those with total qualifying income over £30,000
From 6th April 2028: Mandatory for those with total qualifying income over £20,000

What is Making Tax Digital for VAT?

Making Tax Digital for VAT refers to the first two phases of the MTD initiative. These phases centered on VAT-registered businesses, initially for those above the VAT registration threshold and then expanding to all VAT-registered businesses.

When did this start?

These mandatory requirements have been in place for some time now, with the two phases introduced over the course of four years:

April 2019: MTD for VAT became mandatory for VAT-registered businesses with a taxable turnover above the VAT registration threshold (then £85,000)
April 2022: MTD for VAT became mandatory for all VAT-registered businesses, regardless of their turnover

Making Tax Digital guides, news & advice

Learn more about Making Tax Digital (MTD) and stay up to date with the latest updates and changes.

We can help you prepare for Making Tax Digital

As mandatory Making Tax Digital requirements edge closer, it can be a daunting time for self employed persons and landlords.

At Brearley & Co, we understand the burden that preparing for MTD can feel like – but it doesn’t need to be a stressful process.

Our experienced, friendly team are well versed in the nuances of MTD and we’re proud to have supported many individuals and businesses in getting up to speed and staying compliant.

If you’re worried about MTD deadlines, struggling to find your way around the digital systems and software, or need some help with your submissions, get in touch for a free consultation today.

Making Tax Digital: Frequently Asked Questions

Who is exempt from Making Tax Digital for Income Tax?

There are several situations where an individual or business may be exempt from Making Tax Digital for Income Tax requirements. These include:

Your qualifying income is £20,000 or less
You don’t have a National Insurance number (as of 31st January before the start of that tax year)
You’re completing a tax return as a trustee (including a charitable trustee or a trustee of non-registered pension schemes)
You’re completing any tax return as a personal representative of someone who has died
You’re a non-resident company
You’re digitally excluded due to your age, religious beliefs, or lack of internet access

You can find out more about Making Tax Digital for Income Tax exemptions on the HMRC website.

Even if you’re exempt from using the service, you still must continue to report your income and gains in a Self Assessment tax return.

Do I need to sign up for Making Tax Digital for Income Tax?

Prior to the 6th April 2026 deadline, signing up for Making Tax Digital for Income Tax is voluntary.

You can sign up for testing or simply sign up early, so you’re prepared to use the service.

You’ll only be required to sign up for Making Tax Digital for Income Tax from 6th April 2026 if you have an income of over £50,000 annually, from self employment or property rental.

This threshold drops to £30,000 in April 2027 and £20,000 in April 2028.

Do I need software for Making Tax Digital for Income Tax?

Yes, you’ll need commercial software that is compatible with Making Tax Digital for Income Tax.

You, or an accountant on your behalf, will need to use the software to:

Create, store, and correct digital records of your self-employment and property income and expenses
Send your quarterly updates to HMRC
Submit your tax return by 31 January the following year

HMRC has a software finder tool that suggests recognised software depending on your personal requirements.

This includes things like your accounting period, additional income sources you need to report, and whether you want to create new digital records or connect to existing ones.

Is Making Tax Digital for VAT compulsory?

Yes, Making Tax Digital for VAT has been compulsory for all VAT-registered businesses in the UK since April 2022.

Failing to comply with Making Tax Digital requirements and make submissions on time can lead to penalties.

Get in touch with Brearley & Co if you’re unsure about what you need to do to stay compliant.

Making Tax Digital is coming

Together we'll get you ready for the change. Learn more...

How can we help you?

Brearley & Co Accountants are pleased to offer a free, no obligation, initial consultation with one of our experts who will be happy to discuss your business needs and how we can help you.

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