Making Tax Digital (MTD)

Making Tax Digital (MTD) is at the forefront of the UK Government and HMRC’s quest to establish one of the world’s most digitally advanced tax administrations. While transitioning from paper to digital might appear daunting, it can unlock a wide array of advantages.

What is Making Tax Digital?

Making Tax Digital (MTD) is a pivotal shift in tax compliance, ushering businesses and individuals into a fully digital tax data submission system.

The initiative requires businesses to uphold digital record-keeping standards and submit information online through industry-compliant software.

business owner filing digital tax returns

Why is MTD being introduced?

Navigating paper tax returns is a major headache for both accountants and businesses. The cumbersome process often involves revisiting transactions from almost two years ago, amplifying the risk of errors.

The UK Government approximates that these mistakes amount to a staggering £8.5 billion in lost revenue annually. Digital tax returns are emerging as the solution to streamline processes and alleviate the burdens associated with traditional tax filing methods.

Featured Guide

Making MTD Simple: the all-in-one guide for Making Tax Digital

Making Tax Digital (MTD) can often seem like an ever-evolving beast, thrusting added responsibility onto already time-poor accountants.

Our handy guide draws on our 45 years of accountancy experience, covering everything you need to know about the MTD journey.

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Making MTD Simple - the all-in-one guide for making tax digital guide image

Which taxes does MTD impact?

Making Tax Digital, commonly abbreviated to MTD, spans across a wide timeline and impacts a variety of taxes. Find out more about the impact on these taxes below.

MTD for VAT

Originally launched in April 2019, with the full-scale roll-out in April 2022, MTD for VAT is now applicable to all VAT-registered businesses. Compliance with MTD for VAT mandates signing up from your initial VAT period.

The areas of your VAT submission not impacted by MTD for VAT include: nine-box VAT returns, VAT return frequency and eligibility for VAT Special Schemes.
MTD for Income Tax Self-Assessment (ITSA)

The implementation of Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) has been postponed to April 2026. It targets self-employed businesses and landlords with annual business or property income exceeding £50,000. From April 2027, those with a turnover surpassing £30,000 will also be obligated to participate.
MTD for Partnerships

The integration of MTD for General Partnerships, with a taxable income exceeding £10,000, into MTD for ITSA was initially scheduled for April 2025.

However, while the Government remains committed, this has been postponed, and no further date has been announced.
MTD for Corporation Tax

While the complete transition for all companies is yet to be confirmed, it is anticipated to take place between 2026 and 2030.

Currently, HMRC has not put forth a minimum turnover threshold, leaving the inclusion criteria for businesses in this phase of Making Tax Digital uncertain.

: Making Tax Digital (MTD) is a transformative HMRC initiative aimed at simplifying tax processes for both individuals and businesses. By adhering to MTD regulations and leveraging compliant software, businesses or their accountants can efficiently access tax information through a centralised platform, thereby streamlining the tax completion process.
: Under MTD, quarterly reporting provides a comprehensive summary of your business’ income and expenditures per quarter. As a result, there is no obligation to report under each property address; instead, it involves aggregating all required data.
: As of now, not-for-profit organisations not obligated to register for VAT or Income Tax will continue to be exempt from MTD.
: Accountants need to have a deep understanding of their client list. Identifying clients in need of additional support and utilising segmentation to distinguish between those comfortable with digitisation and those requiring extra assistance will guide focused and effective actions.
: With Making Tax Digital software, businesses can:
• Easily submit quarterly tax returns
• Minimise paperwork
• Ensure accuracy in VAT returns
• Streamline bookkeeping from a unified platform
• Access real-time tax information as needed
• Effectively track funds for financial control
• Gain more time to focus on business growth
: IRIS is your strategic partner in meeting HMRC’s MTD requirements. With over 45 years of compliance expertise, we closely collaborate with HMRC and the UK Government, advocating for UK businesses. Our solutions support accountants, bookkeepers, sole traders and small business owners in navigating the complexities of MTD.