Making Tax Digital

Also called MTD, MTD for VAT, MTD for Income Tax

HMRC's programme requiring digital records and software-submitted returns. Already compulsory for VAT, arriving for income tax.

What it means

Making Tax Digital requires businesses to keep records digitally and to submit returns to HMRC through compatible software rather than by typing figures into a web form.

It applies to all VAT-registered businesses now. MTD for Income Tax Self Assessment is being phased in for self-employed people and landlords above income thresholds, with quarterly updates replacing a single annual return.

Why it matters

It removes the option of doing your books once a year in a spreadsheet the week before the deadline. For businesses that were already using software it changed little; for those that were not it is a genuine change of working practice.

Digital links matter too: the chain from record to return has to be digital throughout, so copying a total from one system into another by hand is not compliant.

What it looks like in practice

Pick software that is on HMRC's compatible list, get the bookkeeping into it, and reconcile monthly rather than annually. Bridging software exists for spreadsheet users but is a stopgap rather than a plan.

Check the current MTD for Income Tax start dates and thresholds on GOV.UK — they have moved more than once.

What to watch out for

Assuming your accountant handles it invisibly. They can file, but the records are yours and the digital-link requirement applies to how you keep them.

Penalties are points-based for late submission, so an occasional slip behaves differently from a persistent one.

Where to get proper advice

GOV.UK holds the timetable, the thresholds and the software list. An accountant or bookkeeper is worth involving before a deadline rather than after one.