What is MTD? This stands for Making Tax Digital, or more specifically MTD for Income Tax. MTD for VAT has been applicable to all VAT registered businesses since April 2022.
Is it relevant to me?
From April 2026, if you are self employed or a sole trader with income over £50,000 per annum you will need to submit quarterly returns digitally. This replaces the previous Self Assessment system where you or your accountant will have just submitted an annual tax return to HMRC.
The £50,000 figure is based on your annual income or turnover, not your profit. If you rent out any property, this income must also be included.
When you submit you 2024/2025 tax return with a deadline of 31 January 2026, the HMRC will let you know if you need to register for MTD.
From April 2027 this threshold will reduce to £30,000.
If you are starting a business after April 2026 you only need to start using MTD after you have submitted your first Self Assessment tax return.
What do I need to do?
You will need to register for MTD or ask your accountant or bookkeeper to do so.
You will need to be using approved software for your business transactions and make sure these records are kept up to date. Every quarter you will need to send a summary of your business income and expenses to HMRC. You will also need to make an end of year submission.
You can find out more about suitable software here.
You can choose to keep your records up to date and make the quarterly submissions through your software yourself, or elect for your accountant or bookkeeper to do this for you. It is likely to provide cost savings to you if you have a bookkeeper keeping everything in order throughout the year, just letting your accountant file your final return.
