Making Tax Digital (MTD) Updates and How to Stay Compliant

Keeping up with the Making Tax Digital (MTD) initiative is not just important but essential for all. So, if you are puzzled by all the jargon around MTD and clueless about what you need to do, read the blog to learn how to stay compliant without losing your valuable time.

What is Making Tax Digital (MTD)?

Making Tax Digital is HMRC’s initiative to make tax reporting more efficient, accurate, and digital. The aim of this government initiative is to reduce errors and bring the UK’s tax system into the 21st century. In short, you need to keep digital records and use approved software to submit your tax returns. Gone are the days of handwritten ledgers and copy-pasting figures into random spreadsheets. So, if you run a VAT-registered business, you must follow MTD rules.

Know MTD Updates

As of 2025, MTD is only for VAT-registered businesses and even for those who have voluntarily registered for VAT; MTD will soon apply for Income Tax Self-Assessment (ITSA). From April 2026, self-employed individuals and landlords with an income over £50,000 will have to stay compliant with MTD. As if this is not enough, self-employed individuals and landlords with income ranging between £30,000 and £50,000 will be pulled in from April 2027.

There are now provisions of penalties for non-compliance. So, if you fail to submit returns digitally or keep proper records, expect fines. MTD-compliant software is mandatory. Of course, you can use Excel sheets if they’re connected via special bridging software. Moreover, MTD demands quarterly reporting for Income Tax Self-Assessment (ITSA). That means four updates a year, not just one big Self-Assessment.

How to Stay Compliant without Losing Your Time & Sleep

Here is how to stay compliant and save valuable time while keeping your sanity intact.

1. Go Digital

Do not just move your paper records into a spreadsheet. Use HMRC-approved accounting software like Xero, QuickBooks, FreeAgent, or Sage. These tools are user-friendly, cloud-based, and integrate directly with HMRC. If you already use one, double-check that it’s MTD-compatible. Sort your paper records into sales invoices, purchase receipts, expense claims, bank statements, etc. Also, even after preparing digital records, keep your original paper records safely, or you can better scan them. Remember, sometimes HMRC ask for some supporting evidence and at that time, they will prove helpful.

2. Keep Real-Time Records

Don’t leave everything to the last minute. Keep records updated regularly. At least update them weekly, if not daily. That means recording income, expenses, and VAT correctly as and when they happen. It might feel like a chore at first, but it saves hours of stress later. Last-minute scrambling for records is something that you must avoid at all costs.

3. Hire a Skilled Accountant

Having an accountant who understands MTD can be a game-changer. Not only can he help you choose the right software, he can help to set it up, train you on how to use it, and ensure your submissions are on time. Just remember, MTD is new territory and having someone in your corner can make a big difference.

MTD isn’t just another red-tape nuisance. It’s here to stay. Honestly, it can help you run your business better. If you’re overwhelmed or unsure where to start, remember you are not alone. Lastly, contact a UK-based accountancy firm and stay HMRC-compliant without all the drama.