Making Tax Digital
What is Making Tax Digital (MTD)?
Making Tax Digital or MTD as it is often shortened to is the Government’s initiative to have a fully digital UK tax system; the plan is for everyone to use digital software as a way of recording, submitting and paying their tax online. This is to make it easier for individuals and businesses to get their tax correct, providing more accurate information to ensure they keep on top of their tax affairs. Watch our what you need to know about MTD video hereSo far Making Tax Digital (MTD) has made significant changes to the way the tax system works, transforming tax administration so it's all online, replacing paper-based reporting. The benefits of reporting digitally are as follows:
- More accurate:
Replacing paper bookkeeping records with digital tax accounts will ensure that the information held by HMRC is ‘live’ and accurate with fewer errors from data input. - Easier to understand:
Digital accounting will help businesses and individuals see how much tax is owed (or due to be returned) with up-to-date records in the financial year– similar to online banking. - Faster to report to HMRC:
MTD software will make it faster to submit returns to HMRC online via compliant software.
Who is affected by MTD and when?
MTD for VAT
Since April 2019, small businesses and individuals with a taxable turnover above the VAT threshold of £85,000 have been required to keep digital VAT records.
From April 2022, all VAT-registered businesses, regardless of turnover, must follow the MTD rules for their first VAT return starting on or after that date.
MTD for Income Tax (ITSA)
Self-employed individuals and landlords with annual business or property income over £50,000 will need to comply with MTD for Income Tax from their next accounting period beginning on or after 6 April 2026.
Those with income over £30,000 will join the system from April 2027, and those earning over £20,000 will be required to comply from 2028.
MTD ITSA - What does it mean?
If you fall into the MTD for ITSA category the following will then be applicable to you:
Maintain digital records
All business transactions will need to be recorded digitally on MTD compatible software. (e.g. QuickBooks, Xero, Sage etc)
Submit four quarterly summaries
Four individual quarterly summaries of income and expenditure will need to be prepared and submitted to HMRC, via your digital software. However, no tax adjustments are required at this stage, it is purely based on income received and expenses paid.
Submit an annual personal tax return
After the fourth and final quarterly summary has been submitted to HMRC, the actual personal tax return will be prepared (as normal), using the self-employed and/or rental figures, as per the quarterly summaries submitted, along with any other relevant information as per your completed income tax questionnaire.
What are the advantages of going digital?
- Be able to view your current financial position in real time
- Have your accounts 100% online so there is no software to install and everything is backed up automatically
- Your bank supplies data directly into your digital account on a daily basis
- No more lost receipts, just take a photo of your receipt on your phone & add it
- Access your data 24/7, 365 days a year from your phone
- Create invoices including how much each customer owes, manage payroll and much more all in one place
What can I really do with digital accounting software like QuickBooks:
- Create and send invoices on the go
- Track sales, purchases, debtors and creditors
- Connect to your online banking
- View a snapshot of your business
- Estimate tax payments
- Easy tax filing that matches HMRC requirements
- Manage customers and suppliers
- Create estimates, purchase orders and manage your stock
Making Tax Digital Costs
To ensure you are fully prepared and compliant, we have developed a structured MTD plan for our new and existing clients. Our role is to guide you through the process smoothly and give you confidence in managing your digital reporting obligations.
Transition to MTD SoftwareWe will assist you in selecting and implementing appropriate digital bookkeeping software. For most clients, we anticipate recommending QuickBooks Online, and we can provide the licence directly. QuickBooks licence: £120 per year |
Initial Setup and AdministrationWe will handle all aspects of the initial setup, including configuring your bookkeeping system, linking your digital tax account, and establishing your MTD filing structure. Initial setup and administration: £200 |
Quarterly MTD SubmissionsWe will help you prepare and submit your mandatory quarterly updates to HMRC. Quarterly submissions: £75 per submission |
Training and Ongoing SupportFor clients who prefer to handle their own digital bookkeeping, we offer a training package designed to help you feel confident using the software. It includes 2 hours of in-house training plus 1 hour of telephone support. Training package: £275 |
If you would like us to assist with your ongoing bookkeeping, we can provide support on an hourly basis - Bookkeeping support: £40 per hour
We always offer the first meeting free with no obligations to commit
